Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

700th ANNIVERSARY OF PARLIAMENT

Mr. Speaker: I have to acquaint the House that I have received a copy of a Resolution passed by the Senate of Texas commemorating the 700th Anniversary of the founding of Parliament and that I am having it placed in the Library where it can be seen by hon. Members.

PRIVATE BUSINESS

BIRKENHEAD CORPORATION (MERSEY TUNNEL APPROACHES) BILL

MANCHESTER CORPORATION BILL

As amended, considered; to be read the Third time.

PETITION

Murder (Abolition of Death Penalty) Bill

Mr. Hiley: With your permission, Mr. Speaker, I beg to present a Humble Petition from the League for Justice and Liberty against the Murder (Abolition of Death Penalty) Bill. It is significant that I should do so on this day, 15th June, 1965, with its interesting and historic connections.
The League for Justice and Liberty has treated this as a sample of the opinions of the people, principally in the north of England, in Lancashire, the West Riding of Yorkshire, Sunderland and Durham. I think it is very significant indeed that there are no less than 6,000 signatures in this pile from the constituency of Nelson and Colne and no less than 17,000 from the constituency of Bootle. The Petition proceeds:
Whereas justice has been administered in the British nation since the days of King

Alfred the Great in accordance with the Biblical principles of just retribution in punishment for proven offences and of individual personal responsibility for wrongdoing;
And whereas penalties should be imposed not only to protect society or to rehabilitate the convicted criminal but in the first place to restore the violated moral and legal order of God's Universe by giving the convicted criminal his just deserts;
And whereas the Word of God plainly teaches in both the Old and the New Testaments that Her Majesty's Government has received from God Himself the authority to wield the power of the sword of justice in the execution of convicted murderers and that the Government may, therefore, resort to its fundamental prerogative of inflicting the death penalty in cases of murder most foul;
And whereas crimes of violence against the persons of Her Majesty's loyal and law-abiding subjects have greatly increased since the days of King George the Fifth.…
Wherefore your Petitioners pray that the death penalty be retained in cases of murder with malice aforethought, and that Justice with mercy be done, and seen to be done fairly, moderately and persistently throughout the land.
And your Petitioners, as in duty bound, will ever pray.
There are 50,000 signatures, Mr. Speaker.

To lie upon the Table.

Oral Answers to Questions — TECHNOLOGY

Research Establishments (Students)

Mrs. Renée Short: asked the Minister of Technology what incentives are given to officers employed in the research establishments of his Department in the experimental officer, scientific assistant and technical classes, to acquire additional professional or scientific qualifications; and what steps are taken to ensure that they stay with his Department after so doing.

The Joint Parliamentary Secretary to the Ministry of Labour (Mr. Richard Marsh): Financial assistance, time off and the recognition accorded to the qualifications. Sandwich course students are required to give an undertaking to remain in Government service for two years after conclusion of the course, but no similar undertaking is demanded of day-release students.

Mrs. Short: Does my hon. Friend understand that this undertaking is not binding and that we are losing one in ten of the officers who go on these sandwich courses? Is he aware that the cost to the State of the completion of these courses is between £2,000 and £3,000? Does he not think, therefore, that there should be additional incentives by way of promotion when officers take these courses successfully?

Mr. Marsh: In the first place one must realise that out of some 53 of these students only 13 have left. It is very difficult to know how to make them stay. They are not lost to the State as a whole. We need more of these people better qualified and there are great advantages to industry in general in having them. Finally—and I have argued this with my hon. Friend before—I do not accept that, having been given these very big sums of public money for their training, in addition these people are entitled to specially privileged treatment over and above that of other students in the same Department who have obtained their qualifications in a different way.

Contracts (Competitive Tenders)

Mr. Hastings: asked the Minister of Technology to what extent he takes competitive prices into account when allocating contracts.

The Minister of Technology (Mr. Frank Cousins): Except in the case of small purchases where it would not be economical to do so, my Department, in accordance with normal Government practice, seeks competitive tenders wherever practicable. In addition to price, the ability to meet the required technical specification and delivery date are important factors in awarding contracts.

Mr. Hastings: Does the right hon. Gentleman realise that the House will welcome this prudent approach, but would he not agree that a Minister's Departmental policy towards costs and prices cannot be readily divorced from his view of the Government's general policy in the same regard? Will he, therefore, take this opportunity—which he should surely welcome—to make his own position in this respect entirely clear? Does he stand by the Government's incomes

policy, or does he support the views of the Transport and General Workers' Union?

Mr. Speaker: That question is out of order.

Marine Nuclear Propulsion

Mr. Geoffrey Lloyd: asked the Minister of Technology whether research and development of marine nuclear propulsion will continue pending the conclusion of the review which he is conducting.

Mr. Cousins: Yes; certain work is continuing, including that covered by the Vulcain agreement with the Belgians which extends to 1967.

Sir H. Legge-Bourke: Will the right hon. Gentleman bear in mind that certain members of the Padmore Committee would have wished when that Committee reported to have come out far more emphatically than the Committee as a whole did and that procrastination was regarded by some members of the Pad-more Committee as utterly disastrous in this matter as leading us into the position of having to be followers-on rather than promoters of new ideas?

Mr. Cousins: I will certainly take those views into consideration, but the hon. Gentleman will be aware that a review is now being urgently undertaken.

Mr. Marples: Will the right hon. Gentleman take a personal interest in liaison with Belgium in this respect, because that country is very advanced in this matter? Would he not agree that it is of crucial importance that we have Anglo-European liaison on these research matters?

Mr. Cousins: I will certainly take account of the right hon. Gentleman's views, which are similar to my own, of the need for co-operation in our efforts on these projects.

Technology (Application)

Mr. Charles Morrison: asked the Minister of Technology what measures he now has under consideration to assist in the application of technology.

Mr. Cousins: My Department is working on the whole range of action described


in the Prime Minister's reply on 16th November to the hon. Member for Middlesbrough, West (Dr. Bray). The programme includes studies in connection with the industries for which the Ministry of Technology is the sponsor department, on engineering standards and on automation. The application of technology is also being furthered by the work of certain Government laboratories, through the Atomic Energy Authority, the new responsibilities of the N.R.D.C. and an extension of the scope of the Department's regional activities.

Mr. Morrison: Is the right hon. Gentleman satisfied with his rate of progress in this direction, and, if not, why not?

Mr. Cousins: I am never satisfied because I am an impatient man.

Productivity

Mr. Marten: asked the Minister of Technology if he is satisfied with the level of productivity in the industries for which his Department is sponsor; and if he will make a statement.

Mr. Cousins: Present levels of productivity need to be raised in order to achieve the objectives of the National Economic Plan. Through its participation in the work of the Economic Development Committees for Machine Tools and Electronics and in the development of its own policies, my Department is seeking to ensure that its sponsored industries can make their contribution.

Mr. Marten: As Mr. Aubrey Jones has now so closely linked productivity with incomes policy, can the right hon. Gentleman say what steps he is taking to impress the Government's incomes policy upon the industries for which he is the sponsor? Secondly, can he also use such influence as he may have on the Transport and General Workers' Union?

Mr. Speaker: Order. I do not propose to be troubled by this again. If it helps the House, the principle is that the Minister is responsible for answering questions relating to his activities as Minister, but not otherwise.

Mr. Marten: Will the right hon. Gentleman answer the first question?

Mr. Cousins: I shall take every step in every discussion with industry, through its associations and through my own Department, to press the need for increased productivity.

Sir A. V. Harvey: Does the right hon. Gentleman recall that at the beginning of the year the First Secretary said that he would arrange for the Government to bring about diversification at Short Bros. and Harland, Belfast, by the production of machine tools? Nothing has been done about this in the intervening months. Can the right hon. Gentleman say what progress is being made?

Mr. Cousins: That question might more properly be addressed to the First Secretary. The subject of machine tools and the diversification of industry was the subject of an examination by representatives of the First Secretary's Department, and I understand that progress in that discussion has been made.

Sir C. Osborne: The right hon. Gentleman said that productivity would have to be increased considerably before the target was reached. By how much will productivity have to be increased in order to achieve its target? Does he not think that it is terribly urgent that this should be done, and will he impress that on both sides of industry in view of the terrifyingly bad import-export figures announced today?

Mr. Cousins: I consider that increased productivity is essential. This is a principle which I have been trying to put forward for a number of years. By how much productivity should be increased depends on the industry under discussion and there can be no set figure for every industry. There is need for improvement, but productivity is a problem for all of us and not just for a Minister or a trade union.

Seaweed

Mr. Hector Hughes: asked the Minister of Technology if he will seek powers to establish a body to exploit the resources of seaweed in the North Sea by harvesting it and converting it into textile fibres and transparent package foil.

Mr. Marsh: No, Sir; I understand that enough work has been done in this field to enable commercial firms to assess


for themselves the economic prospects of exploiting seaweed for these purposes.

Mr. Hughes: Is my hon. Friend not aware that the constructive suggestion contained in my Question has been adopted by other Northern countries with great success and that it is particularly suitable for Britain, with its shallow shelf in the seas around Britain, in order to increase textile production, reduce unemployment and increase exports?

Mr. Marsh: I appreciate that this is a very valuable commodity. Since taking this job I have learned that one can eat it, wear it and grow roses in it. However, I am advised that textile yarns derived from seaweed have a limited application and, therefore, a limited market and that package foil derived from seaweed is not competitive in comparison with that from trees via cellulose.

Industrial Firms (Modernisation)

Mr. Shinwell: asked the Minister of Technology what assistance his Department provides for industrial firms to enable them to adopt modern methods of production and distribution.

Mr. Cousins: All the resources of my Department are intended to help industry in the direction my right hon. Friend indicates. In particular, a prime function of the industrial liaison officers I have appointed throughout the country is to encourage industry to adopt the results of research: and a considerable proportion of the research and development activities sponsored by my Department also have this object.

Mr. Shinwell: Does my right hon. Friend's Answer mean that he accepts some responsibility for assisting industrial firms to adopt modern methods of production? Does he not agree that there may be too many industrial firms which appear to have a vested interest in obsolescence and which are content with their existing positions? Has he prepared an analysis of such firms?

Mr. Cousins: No, an analysis of such firms has not been prepared. However, my Department's original organisation has been strengthened, having in mind the purpose mentioned in my right hon. Friend's first supplementary question. We accept responsibility for bringing the

results of research to industry in any district.

Mr. Geoffrey Lloyd: Can the right hon. Gentleman say whether the advice which he gives to firms includes advice on how to elicit higher productivity from members of the trade unions, including the Transport and General Workers' Union?

Sir H. Legge-Bourke: Will the right hon. Gentleman bear in mind that the contribution which industry has to give to his Department about the most modern methods which could well be employed by other industries is equal to, if not greater than, his own Department can contribute to industry?

Mr. Cousins: Certainly we have that in mind. I am sure that the hon. Gentleman is aware that we have an advisory committee of our own whose members are drawn from very high levels of British industry and which gives us advice, which we think is useful.

Advanced Gas-Cooled Reactor

Mr. Gregory: asked the Minister of Technology what steps are being taken to produce in the United Kingdom the low enriched fuel suitable for the advanced gas-cooled reactor system for nuclear power, at prices competitive with supplies from the United States of America.

Mr. Cousins: The A.E.A. will shortly submit to me proposals on the future of the Capenhurst factory as a producer of low enriched uranium in relation to the need for this material for the second nuclear power programme. I shall not be in a position to answer questions about competitive costs until I have received and considered this submission.

Mr. Gregory: While thanking my right hon. Friend for that answer, I am sure he is aware that industry is very much concerned about the success in obtaining low enrichment fuels to be available not only for our nuclear power industry but also for essential export purposes. I hope my right hon. Friend will make further inquiries to ensure that they are available.

Mr. Osborn: asked the Minister of Technology what studies he has made and what information he has about the operating and installation of water-moderated, advanced gas-cooled, and fast


breeder reactors for the generation of electric power; if he will instruct the Atomic Energy Authority to publish a technical report on reactor types, giving installation and operating costs; and if he will summarise this in a White Paper.

Mr. Cousins: Technical and other information on the advanced gas-cooled reactor, the fast breeder reactor and the steam generating heavy-water type of water-moderated reactor has been and will continue to be published from time to time by the Atomic Energy Authority.

Mr. Osborn: While thanking the right hon. Gentleman for that reply, may I ask him whether he is aware that many welcome the announcement of the breakthrough by the Minister of Power? Although many in the House were disappointed that he was not here but were aware that he had good reasons for not being here, we were somewhat disappointed in the reluctance of the Minister of Power to display enthusiasm for the break-through in atomic energy. We concede that there are certain aspects which are of a commercial nature. There are other aspects of a technical nature for which this House and the country would like much more detailed information. Would he consider publishing—

Mr. Speaker: Order. Perhaps the Minister could now answer to what extent he is aware of these various propositions.

Mr. Cousins: The Minister would have found it a lot easier to answer had he been able to hear the supplementary question. In giving the information, the C.E.G.B. will cover economic and technical details of the advanced gas-cooled reactor and a comparison with the economies of the best of the water-moderated designs submitted for the Dungeness B station. As the hon. Gentleman said, it was regrettable that I was not able to be here. I was with the Atomic Energy Authority on that day. I should have liked to participate in the discussion.

Mr. Dodds-Parker: asked the Minister of Technology whether he will make a statement on the technological implications of the advanced gas-cooled reactor.

Mr. Cousins: I would prefer to defer any statement until fuller technical information becomes available, on conclusion of the contract negotiations between

C.E.G.B. and the industrial group concerned.

Mr. Ridley: asked the Minister of Technology if, with a view to promoting exports of British reactors, he will seek the agreement of the Central Electricity Generating Board and of the nuclear engineering company concerned to the publication, in as full detail as possible and in all the major European languages, of the technical features of an advanced gas-cooled reactor, as recently accepted for the Dungeness B power station.

Mr. Cousins: I understand that comprehensive details of the design and cost of the advanced gas-cooled reactor accepted for Dungeness B station will be given full publicity by the Central Electricity Generating Board as soon as the contract negotiations have been completed. Our diplomatic and trade posts abroad have already been given information to enable them to make good use of the opportunities for publicity presented by the A.G.R. success at Dungeness.

Mr. Ridley: Would not the right hon. Gentleman agree that this break-through gives us great opportunities for sales all over the world, particularly in Europe, and that a very high degree of responsibility rests on his Department to make sure that the information is presented correctly and in the right language and in the way in which people want to have it? Will he give an undertaking that he will look into this matter with the greatest care?

Mr. Cousins: I accept fully that a great degree of responsibility rests on my Department. I am as proud as many other hon. Members must be that the advanced gas-cooled reactor succeeded. We shall consider translating the information into any language when there are prospects of trade.

Mr. Lubbock: In order that the Central Electricity Generating Board could have made this decision in favour of the advanced gas-cooled reactor, must not very thorough studies have been undertaken which have been documented in the presentation to the Board which the Minister now says is being conveyed to our diplomatic staff abroad? Is there any reason why this information should not be given to the House? What is the reason for this continued fatuous secrecy


about the economic assessment by the Central Electricity Generating Board?

Mr. Cousins: There is no question of a blanket of secrecy about this. There are commercial problems involved in discussion between the C.E.G.B. and the group which has succeeded, and I think that both sides of the House recognise that. Our diplomatic and trade posts have been given the broad information on which to work, not the detail asked for in the Question, and I hope that that will be presented as soon as possible.

Sir H. Legge-Bourke: asked the Minister of Technology if he will publish the technical assessments made by the Atomic Energy Authority of the various tenders, British and United States, when advising the Central Electricity Generating Board with regard to the Dungeness B station reactor; what steps he is taking to promote the exports of the type of advanced gas-cooled reactor selected; and what part he plans should be played by the Atomic Energy Authority to this end.

Mr. Cousins: Responsibility for technical assessment of the tenders lay with the C.E.G.B.; it was assisted by the Authority. C.E.G.B. has to complete its contract negotiations with the industrial group concerned before further technical information can be issued.
The Authority has a great interest in promoting exports of A.G.R. stations; and it has many opportunities through its numerous activities abroad, all of which it will be anxious to take.

Sir H. Legge-Bourke: While I appreciate that it may be difficult for the C.E.G.B. to make any publications until the contracts have been completed, may I ask the right hon. Gentleman whether we can take his recent decision about the commercial activities of the Atomic Energy Authority to mean that the Authority can now feel far less inhibited in promoting the sale of atomic energy equipment abroad?

Mr. Cousins: This was the purpose of establishing the trading fund.

Mr. Edward M. Taylor: Will the Minister indicate whether this increased interest in the gas-cooled reactor will mean a delay in the location of a fast-breeder reactor, which may concern Scot-

land? Is he not aware that if a decision on this subject is not made soon there might well be a substantial brain drain from the Atomic Energy Establishment in Scotland?

Mr. Cousins: No, this will have no effect. It will not delay the matter at all. I have answered in correspondence and earlier Written Answers that I hope to visit Scotland concerning this subject shortly. There is, however, a substantial amount of work available at Dounreay at the moment.

Metric System

Mr. Boston: asked the Minister of Technology what action he is taking within his Department to implement the decision to introduce the metric system into Great Britain.

Mr. Frank Cousins: Through its research stations and advisory staff my Department will give every possible assistance to the British Standards Institution in the preparation of the new series of British Metric Standards foreshadowed in the Written Answer given by my right hon. Friend the President of the Board of Trade on 24th May, 1965.

Mr. Boston: Would my right hon. Friend agree that the speedy decision to go ahead with this is an indication of the Government's intention to modernise Britain? [Laughter.] It is all very well for hon. Gentlemen to make much noise, but if they had still been in office Britain would not have been decimalised, it would have been decimated. Could my right hon. Friend say what steps he is taking to see that the fullest possible information is being made available to industry and others involved, and can he say more specifically what is passing between his Department and the British Standards Institution?

Mr. Cousins: The Ministry of Technology, through its research stations and the participation of the grant-aided research associations, is represented on more than 1,000 committees of the British Standards Institution. The measures under discussion at the moment answer the question to which my hon. Friend has referred; they include the production of a comprehensive manual of international method units used in


industry and trade; also, in collaboration with the Central Office of Information, assistance has been given to the Publishers Association in revising engineering text books for the domestic and export markets.

Mr. Lubbock: While welcoming the Government's decision to go ahead on the introduction of metric weights and measures, could the right hon. Gentleman say why there has been complete silence on the introduction of decimal currency?

Mr. Cousins: That is hardly a question for my Department.

Computer Industry

Mr. Boston: asked the Minister of Technology what progress he is making in his plans to expand Great Britain's computer industry.

Mr. Cousins: As my hon. Friend knows, I announced on 1st March a programme for assisting the development of a flourishing computer industry. Good progress has been made in implementing this programme. The Computer Advisory Service is now in operation in my Department. A review of the University and Research Council computer requirements is virtually complete. The National Research Development Corporation is working on proposals for assisting the computer industry. Consultations are in progress on the formation of a National Computer Programme Centre.

Mr. Boston: Would my right hon. Friend not agree that it is essential to give a considerable amount of priority to this, especially in view of the need to make up the immense amount of ground lost by the last Government? Can he say in more definite terms what progress he has made with the National Computer Programme Centre?

Mr. Cousins: I would agree that it is essential that we should make progress with this, whoever is responsible for the situation we were in, because I think it ought to be remedied. Discussions on the National Computer Programme Centre have been held between my Department and the various interests concerned. We have not yet reached conclusions either on location or the extent of this project. I think those who are associated with computers know this

is a very complicated subject. This is particularly true in relation to programming.

Mr. Marples: The original question mentions Great Britain's computer industry. Might I ask the right hon. Gentleman to define what he thinks Great Britain's computer industry is? For example, is it British-owned firms only, or would a 100 per cent. American-owned subsidiary here constitute part of Great Britain's computer industry?

Mr. Cousins: It is part of Britain's computer-producing industry. When one talks about a British-owned firm one is naturally more interested in a British-owned firm, as questions from that side of the House showed a short time ago when hon. Gentlemen asked me if I was prepared to give money for research projects sponsored by an American-controlled firm. We think that the British-controlled computer industry is one wholly British-owned, with its research done here and its staff situated here. But we are not discriminating against other people who are producing computers here. We are not discriminating against them in the sense that they have growing markets for production which we hope to pick up.

Mr. Maxwell: Is my right hon. Friend aware that businessmen and computer experts on both sides of the Atlantic are agreed that had the former Administration made available the necessary resources to the computer industry ten years ago it would not be in the poor state it is in today? Does my right hon. Friend further appreciate that industry in this country and abroad is very well satisfied and congratulate him on the wonderful work he is doing to pull the market together?

Mr. Cousins: It is known, of course, that some of the foreign-operated computer firms have issued literature demonstrating that they think there is a market in Britain because we have not taken advantage of our own opportunities.

Mr. Biffen: So that there should he no ambiguity about this, could the right hon. Gentleman say, even if he is not discriminating against foreign-owned subsidiaries operating in Britain, whether he is discriminating in favour of wholly owned British computer industries?

Mr. Cousins: We have made clear in various discussions on the subject that we should encourage British firms to secure orders competitively against anyone.

Manpower Resources for Science and Technology (Report)

Sir H. Legge-Bourke: asked the Minister of Technology what administrative arrangements he is making for implementing the findings of the Committee on Manpower Resources for Science and Technology which will report to him jointly with the Secretary of State for Education and Science.

Mr. Marsh: We expect to hear shortly from the Committee suggesting a programme for its future work. Until this is available my right hon. Friend is not in a position to say whether any special administrative arrangements will be required for his Ministry.

Sir H. Legge-Bourke: Would the hon. Gentleman be prepared to say, in the light of his right hon. Friend's statement yesterday about the machine tool industry, whether, in the implementation of the "little Neddy's" recommendations, his right hon. Friend is now going to ask this committee to make a special report with a view to implementing the expressed need for increasing scientific and technological manpower for the machine tool industry by 600 by the end of 1968?

Mr. Marsh: I think, with respect, the hon. and gallant Gentleman misunderstands the purpose of the committee. It is essentially an advisory and co-ordinating body and not a committee of inquiry or an executive body. It will not be in a position to tender any substantive advice until it has examined the results of the 1965 triennial survey of scientific and technological manpower, which will not be available until later this year.

Research Work (Duplication)

Mr. Newens: asked the Minister of Technology if he will take steps to discourage the duplication of research in industry and the use of skilled research workers to tackle similar problems in different enterprises.

Mr. Marsh: I agree about the need to discourage undue duplication of research in industry. A number of the measures being taken by my Department contribute to this end. They include the dissemination of the results of researches undertaken directly by my Department, the encouragement of industrial research associations, and of other forms of co-operative research.

Mr. Newens: While thanking my hon. Friend for his reply, may I ask him to bear in mind the fact that the creation of a modern economy in this country requires the planning of research, and will he keep this matter constantly under review in order that we may go ahead as quickly as possible in refurnishing our present industry?

Mr. Marsh: I would certainly accept that. Harking back to the previous question, one of the jobs of the Committee on Manpower Resources for Science and Technology will be to make a much more critical survey than hitherto of the use of qualified manpower. It would be unwise to think it is either possible to prevent duplication in research or that it is desirable to stop such duplication.

Mr. Marten: Would not the hon. Gentleman agree that competitive research on any one subject may be highly desirable?

Mr. Marsh: As my hon. Friend mentioned, what we need is some degree of planning, and a degree of duplication takes place because it is accepted that it is desirable and in the national good. One of the problems in the past has been that nobody knew what was happening.

Decimal Currency

Mr. Osborn: asked the Minister of Technology what consideration the Computer Advisory Unit will give to the importance of the introduction of decimal currency and the cost of any delay; and what provision will be made for the adaptation of present and new equipment and specifications for decimal currency.

Mr. Marsh: The Computer Advisory Unit's responsibility in regard to decimal currency would be confined to advising purchasers and users of computers on any


questions which might arise on its introduction. The adoption of decimal currency would pose no serious problem for the operation of computers.

Mr. Osborn: Has any consideration been given to the cost of delaying a decision in view of the fact that much of the ancillary equipment is designed for pounds, shillings and pence and will have to be modified if there is a change to decimal currency?

Mr. Marsh: The hon. Gentleman probably has the Halsbury Committee's recommendations in mind, but these did not refer so much to computers as to other equipment, which will certainly be taken into account when the Chancellor of the Exchequer makes his announcement. Computers are not affected by this issue.

Mr. Osborn: Is the hon. Gentleman aware that this matter concerns banking where great advances are being made, which brings urgency into the matter?

Mr. Marsh: indicated assent.

Transport Industry (Mechanical Handling)

Mr. Bence: asked the Minister of Technology what consideration he has given to the development of mechanical-handling devices in the transport industry.

Mr. Marsh: The Ministry of Technology does carry out and support some research work of relevance to materials handling. As my hon. Friend is aware, transport undertakings have given, and are giving, a great deal of attention to this matter.

Mr. Bence: Is my hon. Friend aware that one respect in which the modernisation of British industry can take place and where great economies can be made is in the trans-shipment of goods from one form of transport to the other? Will he undertake an extensive survey of the shortcomings in our country in the transshipment of goods?

Mr. Marsh: A number of inquiries of this type are taking place. My right hon. Friend will be happy to consider, in consultation with the Minister of Transport, whether his Department can be of any further assistance in this matter.

Mr. Gresham Cooke: Would the hon. Gentleman say what consideration he has given to the development of fork-lift trucks and other mechanical handling devices in connection with transport in the docks, and what is being done to modernise the system and to bring our docks up to date with European docks?

Mr. Marsh: The Ministry is represented on the research council of the National Ports Council. The Ministry is engaged in considering just these problems.

Mr. Charles Morrison: What consideration has the hon. Gentleman given to the mechanical handling of baggage, particularly at London Airport when members of the Transport and General Workers Union are on strike?

Mr. Marsh: If hon. Members were to ask questions which were intended to be serious, they would be entitled to serious anwers to them.

Machine Tool Industry

Mr. Dudley Smith: asked the Minister of Technology if he will now make a statement on the future of the machine tool industry.

Mr. Cousins: I would refer the hon. Member to the statement on machine tools which I made yesterday.

Mr. Smith: The right hon. Gentleman willl be aware that this Question was short-circuited by his statement yesterday. Would he say whether he visualises the possible Government action of which he spoke as meaning possible State intervention in some of these machine tool firms, falling short of outright nationalisation?

Mr. Cousins: I said yesterday that I would not rule out anything which was necessary to improve the economic condition of the machine tool industry in the interests of both the industry and the economy of the country.

Mr. Wainwright: Is my right hon. Friend satisfied that the machine tool industry is as efficient as it should be? Has he received any complaints from the machine tool industry that industry as a whole is failing to encourage the ideas which stem from the machine tool industry? Will he do something to waken up


industry as a whole so that further advantage can be taken of the machine tool industry's ideas?

Mr. Cousins: Certainly there have been complaints. The basis of my statement yesterday was that there was a need for an exhaustive examination of the problems in the machine tool industry. We would be prepared to do anything to assist in handling both cyclical problems, stockpiling and shortages of sophisticated machinery and to deal with any other problem in the machine tool industry.

Mr. Marten: asked the Minister of Technology the policy of Her Majesty's Government with regard to the nationalisation of the machine tool industry.

Mr. Cousins: I would refer the hon. Member to the statement on the machine tool industry which I made yesterday.

Mr. Marten: Does not the Minister recall that my right hon. Friends the Members for Wallasey (Mr. Marples) and Bexley (Mr. Heath) both asked him outright whether there was any intention to nationalise the machine tool industry? As he did not answer either of them, can he now give a clear "Yes" or "No" to that simple question?

Mr. Cousins: I thought that I answered quite fully yesterday, and have continued to do so today, that I shall take whatever steps are necessary through my Department to present to this House any views that I may hold upon the industry. If right hon. and hon. Members opposite are suggesting that I should carefully study the question of the nationalisation of the machine tool industry, I will take that into account, too.

Mr. Biffen: In the seven-month review of the machine tool industry which culminated in yesterday's statement, did the Minister consider the establishment of a State-owned machine tool company? If so, what evidence dissuaded him from putting it into effect?

Mr. Cousins: There was not a seven-month review of the machine tool industry. There is one that has been conducted to my knowledge over the last three-and-a-half years. Two-and-a-half years ago a report was issued upon which

no action was taken. We have subsequently had the reports both of Sir Steuart Mitchell's committee and of the "little Neddy" on machine tools, and I have given consideration to the factors involved in those reports and have reported accordingly. There was at no time a suggestion that there should be nationalisation of a part, a company or any total section of the machine-tool industry.

Mr. Bagier: Would not my right hon. Friend agree that the policy upon which he decides should be determined by the efficiency of the industry in question? Would he not agree, further, that many of us in our constituencies when visiting various firms are fed up with being shown with pride Swedish, German and American machines which could well be made in this country? Would my right hon. Friend agree that if the machine-tool industry fails in his examination, we should consider nationalising it?

Mr. Cousins: If, after the examinations have been completed and the steps which we propose have been taken, there is no improvement in the situation, I propose that I shall do as I keep saying: that is, come back to this House with any additional proposals that I may have. I, equally, have been quite disturbed to go into factory organisations and machine shops and find machine tools made by foreign manufacturers.

Mr. Marples: Does that statement by the Minister mean that the threat of nationalisation still hangs over the machine-tool industry? If it does, how can he expect the machine-tool industry to obtain capital?

Mr. Cousins: The right hon. Member may have read in some of the Press this morning that my statement on machine tools was acceptable to the Machine Tool Trades Association. I suggest that if one continues this practice of pretending that something is a danger which does not exist—[Interruption.] There is no proposal to nationalise or partly to nationalise either a firm or any section of the machine-tool industry, but I would not hesitate to bring any necessary proposals before the House.

Oral Answers to Questions — GERMANY (BRITISH TROOPS)

Mr. Bruce-Gardyne: asked the Prime Minister what progress he has now made since his visit to Bonn in March in his efforts to obtain from the West German Government binding commitments to offset the foreign exchange costs of British troops in Germany.

The Prime Minister (Mr. Harold Wilson): I would ask the hon. Member to await the outcome of my right hon. Friend the Chief Secretary's visit to Bonn which is now arranged for 28th and 29th June.

Mr. Bruce-Gardyne: Does the Prime Minister recall that three months has passed since he told us that he regarded this as a matter of urgency? In view of the two postponements of the Chief Secretary's visit to Bonn, can the Prime Minister tell us what has happened to cause the delay?

The Prime Minister: We shall get the full story and how far the West German Government are prepared to meet our requirements, to which we attach so much importance, when my right hon. Friend the Chief Secretary goes to Bonn. The reason for the postponement of his visit was the visit by General de Gaulle. We were told that since Dr. Erhard wanted to give his personal attention to this question when my right hon. Friend was over there, it would be better for him to come at the new date. That is a welcome assurance that the Germans are really working very hard on this question.

Mr. Zilliacus: asked the Prime Minister, in view of Her Majesty's Government's policy that the economic burden and strain on the balance of payments of British defence costs in the North Atlantic Treaty Organisation must be reduced, whether he will now draw the attention of the Government of the German Federal Republic to the fact that the collective defence obligation of the North Atlantic Treaty Organisation applies only in case of unprovoked aggression, and that refusal to recognise and accept Germany's existing frontiers, claims to a share in nuclear weapon decisions and rejection of Her Majesty's Government's proposals for a European settlement through disengagement con-

stitute provocative policies releasing Great Britain from her North Atlantic Treaty Organisation obligations and justifying the return home of the British Army of the Rhine.

The Prime Minister: No, Sir.

Mr. Zilliacus: While thanking my right hon. Friend for his very clear and concise reply, may I ask whether he will at least give an assurance that the Government do not consider themselves bound to keep a British Army on the Rhine indefinitely, whatever the policy of the West German Government, and whatever the cost to the taxpayer?

The Prime Minister: With regard to the old question of the force levels in N.A.T.O., I would refer my hon. Friend to what was said by my right hon. Friend the Secretary of State for Defence in the right place where this should be said, and that was at the N.A.T.O. Council of Defence Ministers.
With regard to the cost, not only to the taxpayer but more particularly across the exchanges, this question will arise in the first instance during the visit to Bonn of my right hon. Friend the Chief Secretary.

Sir C. Osborne: As Soviet policy is no longer expansionist as far as the West is concerned, may I ask what is the real purpose of our Forces serving in Germany and why cannot they be brought home?

The Prime Minister: I am not sure whether the hon. Gentleman is arguing from what is clearly, as we all recognise, a big change in the Soviet's attitude to the West—we have debated it many times—and saying that that is an argument for scrapping N.A.T.O. altogether or for scrapping the ground forces of N.A.T.O. If that is his argument, I would not follow him.
It is for N.A.T.O. collectively to decide how large our contribution should be or how large the force levels should be, and this is being done. Of course we all look forward to a situation in which we can get agreement with the Soviet Union for a withdrawal on both sides thus leaving the existing balance of military power between the two sides the same. This would be of great value to this country and to peace.

Mr. Paget: In view of the fact that this rather long Question appears to involve some anxiety about the future course of West German policy, does my right hon. Friend think that the best way to influence that policy is to withdraw the troops that we have got there?

The Prime Minister: I thought that I had made it clear that we were not suggesting any unilateral action of that kind. These matters are partly a question of economics—and I have explained the situation there—and partly a question of the deployment of N.A.T.O. forces as a whole, and that is a matter for multilateral decision.

Mr. Hooson: Will the Prime Minister bear in mind the fact that if British ground forces were to be withdrawn from Western Europe and our example were to be followed by the United States it would leave German ground forces dominant in Western Europe—which might be a highly undesirable state of affairs?

The Prime Minister: I have said that this is a matter for collective decision by N.A.T.O. I am sure that that is right—although I am also sure that the hon. and learned Member would support, as we all would, any hopes there may be of obtaining, over a period of time, a possible withdrawal on both sides of the Iron Curtain.

Oral Answers to Questions — MINISTERS (PRESS INTERVIEWS)

Mr. Ian Gilmour: asked the Prime Minister why he has given a direction to Ministers that their Press officer should be present when they talk to members of the Press; and if he will make a statement.

The Prime Minister: No change in the existing practice is involved.
It has always been the normal practice for an official to be present when Ministers meet third parties to discuss official matters so that a record can be kept and any necessary action initiated.

Mr. Gilmour: Is the Prime Minister aware that a number of journalists have been surprised recently to find that when they see Ministers they now appear chaperoned by their Press officers, which they never did before? Is the right hon.

Gentleman really telling the House that there has been no change in the practice, or will he agree that guidance on this matter has been issued from No. 10 Downing Street?

The Prime Minister: It is not so much a direction but more a reminder of what the practice is. If there has been this change which the hon. Member's sources have brought to his attention, this will be some reassurance that the present Government will not be conducted like the leaky sieve that the last one was.

Mr. Boston: Does not my right hon. Friend agree that the Question suggests that the hon. Member for Norfolk, Central (Mr. Ian Gilmour) has been having difficulty in promoting the interests of his right hon. employee in his attempts to make him something more on the Opposition Front Bench than just a spectator?

Mr. Speaker: That exceeds the possibility of the Prime Minister's responsibilities.

Oral Answers to Questions — HIS HOLINESS THE POPE (PRIME MINISTER'S VISIT)

Mr. St. John-Stevas: asked the Prime Minister if he will make a statement on his official talks in Rome with His Holiness the Pope.

The Prime Minister: I was received by His Holiness The Pope with great friendliness. The details of our talk are confidential, but I can say that we had a valuable discussion on many matters of mutual concern, particularly the safeguarding of peace.

Mr. St. John-Stevas: In thanking the Prime Minister for his reply and appreciating the reason for his reserve, may I ask him to consider a further improvement in the relationship between London and the Vatican by raising the status of our mission at the Holy See from that of a legation to an embassy? Does not the Prime Minister agree that, in the cordial ecumenical climate which now, fortunately, exists, this would be appropriate? As I understand that nearly all Her Majesty's missions abroad are of ambassadorial status, would not such a change be in accord with the dignity both of Her Majesty and of the Holy See?

The Prime Minister: That is a separate question; it did not arise in this audience. It was not discussed at that time. I am, however, happy to tell the hon. Member that relations between our legation and the Holy See seem extremely good and are the means of keeping a regular flow of information both ways about the international situation.

Mr. Ogden: Will my right hon. Friend recall that Cardinal Heenan has recently expressed the hope that His Holiness may be able to visit this country in 1966 for the dedication of the Cathedral of Christ The King? Will my right hon. Friend consider advising Her Majesty that such a visit would be welcomed by men of good will of all faiths in this country if such an invitation could be offered to His Holiness?

The Prime Minister: That is another question, too. Again, it is right for me to say that it was not discussed on my visit to Rome.

Oral Answers to Questions — VIETNAM

Mr. Zilliacus: asked the Prime Minister to what extent, during his visit to Washington last December, he arrived at an understanding with President Johnson to continue the previous Government's policy of the Anglo-American division of labour in Vietnam and Malaysia, which was mentioned at the South-East Asia Treaty Organisation Council in May.

The Prime Minister: There was no such understanding, no such concept of an international division of labour, and no such reference in the transactions of the meeting of the South-East Asia Treaty Organisation held last month in London.

Mr. Zilliacus: In that case, was not the subject of Vietnam discussed at all in December? If not, when was this Anglo-American division of labour first agreed on?

The Prime Minister: Of course, Vietnam was discussed last December, and indeed I reported certain aspects of the discussion to the House, including the question of British troops in Vietnam and other subjects, but I said in my first Answer that during my discussions with President Johnson there has been no ques-

tion of what he calls this international division of labour.

Sir Alec Douglas-Home: Is not Question Time an unsatisfactory occasion for discussing this very serious situation in Vietnam, and cannot the Prime Minister stimulate the Leader of the House to give us time for a debate on this matter?
Secondly, can the Prime Minister explain how it is that the Foreign Secretary can find time to go to Oxford with his hon. Friend the Member for Ashfield (Mr. Warbey) and talk to undergraduates and dons about Vietnam and Government policy, but he cannot, apparently, find time to come to the House and make a statement?

The Prime Minister: The right hon. Gentleman seems to forget that my right hon. Friend did come to the House on the last day before Whitsun and make a full and encouraging statement about our attitude in relation to Vietnam.
As the right hon. Gentleman knows, the question of a debate is one for the usual channels. We have already given a day for a foreign affairs debate, quite recently. The right hon. Gentleman can always offer a Supply day, and I do not think that I am treading too much on my right hon. Friend's responsibilities when I say we want a debate on foreign affairs, including Vietnam, as soon as it can be arranged.

Mr. Mendelson: In view of recent developments, and the more serious situation in the war in Vietnam—the fuller commitment of the United States forces as direct combatants, and the increased offensive actions of the Vietcong—does not my right hon. Friend consider that a personal initiative on his part is now the order of the day, and would receive the full support of the nation?

The Prime Minister: I want to make it plain that the Government are deeply disturbed about the present position in Vietnam, and the developments of the last two or three weeks. Certain consultations are now going on. I hope that the House will not press me to go into detail about them, because I am sure that the whole House, like the Government, wants these to be fully productive. I hope to make a statement to the House about them very soon.

Mr. Grimond: Arising out of the Prime Minister's last answer, and without pressing for any details of the consultations, may I ask whether he can confirm that as each of these developments takes place in Vietnam we are consulted, together with the other allies of the United States? Can he also say anything about the proposals which the Foreign Secretary let out in his statement to the House before Whitsun?

The Prime Minister: There is another Question on the Order Paper which deals with the right hon. Gentleman's first question, and the short answer is, "Yes, we are in the closest touch about developments of this kind". On the second part of the question, I would prefer to wait until I can make a statement to the House.

Mr. Michael Foot: I appreciate my right hon. Friend's statement that he wishes to make an early further statement on this matter to the House, but can he tell us whether the Government have pressed on the United States Government that their promise of their desire for early negotiation takes into account the possibility of negotiations including representation of the Vietcong at the conference table? Secondly, can my right hon. Friend say whether the Government have urged on the United States Government the desirability of a further cessation of the bombing of North Vietnam in order to make fruitful this possibility of negotiations, which is the only way in which the United States and the Western world can escape from the dilemmas and difficulties of this situation?

The Prime Minister: I always have the problem, as does anyone in this position, of deciding at any moment of time just how much can be told to the House—which one wants to do—and how far it is wise to say as little as possible. During our exchanges at Question Time in February and March I was being strongly pressed about a number of things. I took the line that private consultations were going on. I think that they played a big part in securing the acceptance by a number of our allies of the principle of a conference, which had been very difficult to achieve before. Tempted as I am to try to reply to my hon. Friend, I think that on the whole it would be better to say nothing at this moment while the consultations are going on.

Mr. Longden: Until we can have a debate, will the Prime Minister make his hon. Friends below the Gangway aware of the fact that President Johnson is seeking to compel respect for the obligations arising from a treaty—which is one of the objects of the United Nations Charter—and is also seeking to prevent naked aggression from being seen to pay in a part of the world in which Britain and the Asian and Australasian Commonwealth have vital interests? In the meantime, will the Prime Minister not allow his resolution and that of his right hon. Friend the Foreign Secretary to be "sicklied o'er" by these fledglings and faint hearts who have learnt nothing from the lessons of the 'thirties?

The Prime Minister: I am sorry that I cannot agree with the hon. Gentleman's analysis of the situation so far as the Government and the position in the House are concerned. I cannot really believe that the hon. Gentleman's eloquent little speech and his Shakespearean quotation are really designed to help in this difficult situation. If I thought that they were, I would pay tribute to the hon. Gentleman, but I am afraid that I cannot do so.

Mr. Speaker: Mr. Zilliacus, to ask the next Question.

Mr. Warbey: On a point of order. Mr. Speaker, as the Prime Minister, in his supplementary answers, has widened the scope of the Question to cover matters included in my Question on the Order Paper, may I have the opportunity of putting a supplementary question to him?

Mr. Speaker: I am afraid not. I should love to go on inviting them, but by doing so we do not get Questions answered.

MR. ROBERT SHELTON (VISIT)

Mr. Thorneycroft (by Private Notice): May I ask the Secretary of State for the Home Department a Question of which I have given him Private Notice, whether he is aware of the intended visit to this country of a Mr. Shelton, an American citizen, and a member of the Ku Klux Klan—[Interruption.]—with the declared purpose of entering into discussions on race problems here; and if he will extend no official facilities to Mr. Shelton by the grant of a visa or otherwise for such a visit.

The Secretary of State for the Home Department (Sir Frank Soskice): I have seen Press reports about this projected visit. If Mr. Robert Shelton, or any other foreigner identified as being engaged in the activities of the Ku Klux Klan, arrives here he will be refused leave to land; and any foreign visitor found to be engaged in such activities during his stay in this country will be required to leave.

Mr. Thorneycroft: I thank the Home Secretary for his very clear answer on this matter, which will give general satisfaction to the House, including the hon. Member for Brixton (Mr. Lipton), who had a Question on this subject on the Order Paper. I am sure that this approach will find support among all people who want a sensible and humane approach to our racial problems.

Sir A. V. Harvey: On a point of order. When my right hon. Friend was asking his Private Notice Question I distinctly heard the hon. Member for South Ayrshire (Mr. Emrys Hughes) say, "Like Mr. Peter Griffiths". [Interruption.] I put it to you, Mr. Speaker, that my hon. Friend the Member for Smethwick (Mr. Peter Griffiths) should be protected from this type of aggressiveness.

Mr. Speaker: I did not hear what was said, but if the implication was that an hon. Member was engaged in these Ku Klux Klan type of practices, that expression should be withdrawn.

Mr. Michael Foot: I think that there has been some misapprehension, Mr. Speaker. I do not think that it was anything said by my hon. Friend the Member for South Ayrshire (Mr. Emrys Hughes) that caused trouble. I certainly referred to the hon. Member for Smethwick (Mr. Peter Griffiths) in connection with this matter, because he is the major Member of the House who has conducted racialist propaganda.

Hon. Members: Withdraw.

Mr. Speaker: I thought that the hon. Member was trying to help me about the facts. That was my first impression. His further observations about the hon. Member should be withdrawn.

Mr. Thorpe: Further to that point of order—

Mr. Speaker: I want the withdrawal first.

Mr. Foot: I am not sure what you are asking me to withdraw, Mr. Speaker. I said, by way of an interruption, that the hon. Member for Smethwick has been engaged in racialist propaganda. Everybody in the country knows that. I was extremely grateful to hear from the Opposition Front Bench a denunciation of this kind of propaganda—we were all grateful—although it is a little late in the day.

Mr. Speaker: I do not fancy that accusations of racialist activities or propaganda assist the business of the House. I require a withdrawal.

Mr. Foot: It is quite impossible for me to withdraw—[HON. MEMBERS: "Name."] It is quite impossible for me to withdraw a charge of racialist propaganda against the hon. Member for Smethwick, since everybody knows that he does it. The same applies to the Leader of the Opposition, who has never repudiated the propaganda—[HON. MEMBERS: "Oh."] I submit to you, Mr. Speaker, that such a charge, however odious, is perfectly proper for an hon. Member to make of another hon. Member. If I am asked to say that I do not believe that the hon. Member for Smethwick has engaged in racialist propaganda it is quite impossible for me to do so, because that would be a lie.

Mr. Speaker: The hon. Member seems to be getting this a little wrong. If he wants to say that another Member has engaged in these—I forget his exact words—distasteful and wrong practices, there is a proper procedure in the House for doing it. What is wrong is to take the opportunity which he now seeks. I require him to withdraw what he said.

Mr. Sydney Silverman: On a point of order. Surely the question whether an hon. Member's actions or speeches in the country or outside do or do not amount to racialist propaganda is purely a question of political opinion, on which every hon. Member is entitled to express his views. It is very difficult for most of us to see what can possibly be out of order about that.

Mr. Speaker: This is the point about it: I do not want anybody to get enraged. There is a method to be followed


if a Member wishes to complain about another Member's conduct. [HON. MEMBERS: "He is not complaining."] He can table the appropriate Motion, and do so. What, in the interests of the House, I am concerned with is that we should not bandy such accusations about, because it does not help the proceedings of the House. I am not denying the hon. Member any right. I am only asking him to follow the normal practice in these matters.

Mr. Michael Foot: What I have said I believe to be in full accordance with Parliamentary precedent, Mr. Speaker. I am not prepared to withdraw anything that I have said.

Hon. Members: Name.

Mr. Speaker: I am sorry that the hon. Member should seek this course and challenge my Ruling. I desire only the good of the House. I hope that on that ground the hon. Member will reconsider what he has just said. I do not think that any useful purpose is served by not taking the directions of the Chair.

Mr. Paget: Is it not clear that there is a misunderstanding between us on this matter? The hon. Member for Macclesfield (Sir A. V. Harvey) said that my hon. Friend the Member for South Ayrshire (Mr. Emrys Hughes) had mentioned the name of the hon. Member for Smethwick (Mr. Peter Griffiths). In those circumstances, since my hon. Friend the Member for South Ayrshire had not mentioned the name of the hon. Member for Smethwick, but my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) had done so, it was in order for him to say, "No, I was the person who said that the hon. Member for Smethwick was engaged in racialist propaganda".
Was not that in order, with respect, Mr. Speaker? Was not that the occasion when my hon. Friend the Member for Ebbw Vale should have said that? If he had not, it would have left the mistaken impression that the remark was made by my hon. Friend the Member for South Ayrshire. It is difficult to see what else my hon. Friend the Member for Ebbw Vale could have done. Now he is being asked to withdraw, in the sense of saying that he no longer adheres

to a statement which he believes—and which most of us believe—to be true.

Mr. Speaker: I am grateful to the hon. and learned Member for trying to help me. It is true that this was begun by the hon. and gallant Member for Macclesfield (Sir A. V. Harvey) levelling an accusation against, I think, the hon. Member for South Ayrshire (Mr. Emrys Hughes), as having pronounced something into the arena, as it were. The hon. Member for Ebbw Vale (Mr. Michael Foot) then got up to say that his hon. Friend had not uttered the words, whatever they were, and proceeded, in my presence, to utter words which I thought should not properly be uttered in this context and in this place.
The hon. and learned Member for Northampton (Mr. Paget) takes the point and says that the hon. Member for Ebbw Vale is being asked to withdraw words which he wishes to assert are true, or the like, and that that is an impossible position for him to be put in. With great respect to the hon. and learned Member, that is not the position. I was being very careful to say that if you want to say these things about another hon. Member you must adopt the proper procedure for doing so. What is wrong is to do it on this occasion. Withdrawal does not mean that you do not assert that the words are true, only that the occasion on which you uttered the words was not the right one.

Sir A. V. Harvey: Sir A. V. Harvey rose—

Hon. Members: No.

Mr. Speaker: Order. I must hear what help I can get.

Sir A. V. Harvey: Further to my original point of order, may I apologise to the hon. Member for South Ayrshire? What I heard was an hon. Member sitting in the region of the hon. Member for South Ayrshire, when my right hon. Friend the Member for Monmouth was referring to the Ku Klux Klan, say, "Like Peter Griffiths".

Mr. Speaker: It is extremely confusing to know if anyone said in that context these words. If I cannot get help about it I do not know.

Mr. Emrys Hughes: On a point of order. I have never heard of Mr. Peter Griffiths.

Mr. Grimond: On a point of order. I am not entering at all into discussion of the fact that you have asked the hon. Member to withdraw, Mr. Speaker. I think that it is important for the House to have this clear. If the words accusing another hon. Member of practising racial discrimination, whether true or not, are out of order, surely they are always out of order, and will be as much out of order in debate as they are in an interjection?
I am subject to your guidance but it is the common small change of politics to accuse one another of one thing or another. Though I do not support this accusation, we have heard the words and if they are out of order in an interjection are they perfectly in order in a debate?

Mr. Speaker: I hope that the right hon. Member will not make my task more difficult. I have to judge what I think are abusive words in a Parliamentary sense. I can imagine circumstances in which, perhaps, the accusation of racialist propaganda might not call for the intervention of the Chair. In this context I thought that it was abusive and I still think that it was.
On the other point which the right hon. Gentleman raised, if I may explain—if you wish to make an abusive accusation about the conduct of another hon. Member, you should argue the matter by tabling a substantive Motion to enable you to do it. In any other circumstances it would not be in order.

Mr. Sydney Silverman: On a point of order. Am I right in assuming, Mr. Speaker, that your main reason for asking my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) to withdraw the words is that you regard the words as an unjustified attack on the character or conduct of another hon. Member? If that is the reason, would my hon. Friend be in order in producing evidence to show that the attack was not unjustified at all?

Mr. Speaker: No. If I think the terms are abusive and, in that sense, unparliamentary—whether justified or no—that would be their state. That is the

point. It does not assist the progress of Parliament if we do these things. That is why it is in my interests in the Chair to ask that they be withdrawn.

Sir Alec Douglas-Home: I did not wish to intervene, because I had hoped that the hon. Member for Ebbw Vale (Mr. Michael Foot) would help the House by withdrawing what he said. As we heard the words on this side of the House—the hon. Member for Ebbw Vale will no doubt correct me if I am wrong—when it was said that Mr. Shelton had been invited to this country, the hon. Member interjected to say, "At the invitation of Peter Griffiths." If those were the words he used, I hope that he will be able to withdraw them.

Several Hon. Members: Several Hon. Members rose—

Mr. Speaker: That raises yet another matter relating to words which I did not hear and could not conceivably hear from here, and I do not know whether they are accepted or not. As I explained to the hon. Member, he is not required to deny his belief in the accusation he made, but merely to acknowledge the fact that this is not an apt opportunity to make it.

Mr. Michael Foot: First, I repudiate entirely the suggestion which was made by the Leader of the Opposition as to what I said. Secondly, I understand perfectly what you have said to me now, Mr. Speaker, that I am not called upon at all to repudiate the accusations which I have made, but that you have said that this is not the appropriate time to make them. I appreciate greatly what you have said, and, in that sense, I withdraw. I must make it absolutely clear that I do not withdraw what I said, because I believe it to be the absolute truth.

Hon. Members: Oh.

Mr. Speaker: To reassert on an equally inappropriate occasion the insult previously delivered does not help, but the House may take the view that, in the case of the hon. Member—[HON. MEMBERS: "No."]—that amounts to a withdrawal. I doubt whether the House would wish to spend more time upon this matter.

Mr. Peter Emery: On a point of order. During the Private Notice Question which was asked by my right hon. Friend the Member for Monmouth (Mr. Thorneycroft), when my right hon. Friend


was at the Opposition Dispatch Box, I distinctly heard the hon. Member for Ebbw Vale (Mr. Michael Foot)—because I wrote it down—say, "Ku Klux Klan, like Peter Griffiths." I would contend that, irrespective of anything which has happened since, that was a direct smear on one of my hon. Friends and ought to be withdrawn.

Mr. Speaker: I understood that the hon. Member for Ebbw Vale is now disputing that he said that, so the facts are in dispute. I cannot decide, on a number of noises, what is right or wrong. I do not dispute that the hon. Gentleman firmly believes and is satisfied that he heard those words. I do not dispute that the hon. Member for Ebbw Vale, unless my recollection is wrong, denied that he used them. In those circumstances, there is no foundation on which I can act. Let us get on with business.

Mr. Emery: Further to that point of order. As I understand—and I want to get on with business as much as anyone else—the hon. Member for Ebbw Vale denied having said anything about an invitation from Peter Griffiths. However, he did not deny the words which I have drawn to your attention. May I, therefore, ask you whether at this moment the hon. Member for Ebbw Vale denies the allegation which I make?

Mr. Speaker: I think that this is only wasting more time. We had better get on with business.

IMMIGRATION (REPORT OF LORD MOUNTBATTEN'S MISSION)

The Prime Minister (Mr. Harold Wilson): With permission, Mr. Speaker, I wish to make a statement.
I have just received from Lord Mountbatten a Report on his mission to a number of Commonwealth countries to discuss the control of immigration into the United Kingdom. This mission has been immensely valuable in securing real understanding between the countries visited and ourselves about the nature of the problems we are facing, and we are greatly indebted to Lord Mountbatten.
Lord Mountbatten's discussions with Commonwealth Governments were on a

strictly confidential basis and his Report will not be published. We are studying it urgently, and I am looking forward to having some discussion with the Commonwealth Prime Ministers principally concerned while they are in London this week and next.
After that, the Government intend to make a full and detailed statement to the House of what is proposed in the light of these discussions.

Sir Alec Douglas-Home: I join the Prime Minister in thanking Lord Mountbatten for having undertaken this task on top of his other duties. As the Prime Minister said, a statement will be made as soon as possible. That statement will, no doubt, be subject to debate and I hope that the Prime Minister will agree that we should have a debate on it as soon as possible.

The Prime Minister: I think that the right hon. Gentleman had better wait and see the statement first. Then, of course, there would be discussions through the usual channels. I am not at this moment making any promise on my right hon. Friend's behalf about a debate, but we shall make the statement as quickly as we can.

Sir C. Osborne: Arising from the report made by Lord Mountbatten and the subsequent discussions which the Prime Minister will have with the Commonwealth Prime Ministers on this extremely difficult issue, will the right hon. Gentleman promise the House and the country that he will make it clear to our visiting friends that the policy of immigration is a matter for the decision of the people of this country and not for the Commonwealth as a whole?

The Prime Minister: One of the problems here is that whatever is done—and concern has been expressed on both sides of the House about the problems of evasion and a number of other questions—should be done, so far as possible, in consultation with and, wherever possible, in agreement with and with the help of the Commonwealth Governments. This Report is extremely valuable in this connection. I only wish that it were possible to publish it but, for reasons which the House will understand, it is not. The discussions with our Commonwealth friends have proceeded in an amicable way and I am not sure that the phrase


which sounded somewhat truculent in the mouth of the hon. Member for Louth (Sir C. Osborne) helps to carry forward what we all want to achieve.

Mr. Thorpe: While associating myself with the remarks of the Prime Minister about Lord Mountbatten having undertaken this tour, may I ask him two questions? First, in view of the confidential nature of the discussions with his Commonwealth colleagues, will he try to obtain from them agreement for a statement to be made to this House, giving the widest possible information, so that we are not covered by a communiqué which, in effect, for reasons of the confidential nature of the matter, really hides most of the discussion?
Secondly, if the right hon Gentleman takes this view, will he press for a special conference to be held later, with Ministers from Commonwealth countries, exclusively to discuss the question of immigration, instead of having the subject on what will be a very long agenda where only the main outlines can be discussed?

The Prime Minister: The hon. Gentleman referred to a communiqué. I referred to having discussions with the Prime Ministers principally concerned while they are in London. I was not implying that there was to be a general discussion with my Prime Minister colleagues at the conference on this problem but that there would be a series of bilateral discussions, following the contacts made by Lord Mountbatten. We will certainly make the fullest possible statement to the House, but, in the interests of getting the best results, the statement should be made on the authority of the Government. I do not think that it would be fair to our Commonwealth colleagues necessarily to associate them in every detail with the particular points we are making.

VIETNAM

Mr. Warbey: I beg to ask leave, Mr. Speaker, to move the Adjournment of the House, under Standing Order No. 9 for the purpose of discussing a definite matter of urgent public importance, namely,
the failure of Her Majesty's Government to take immediate action, through the United

Nations, to stop the new acts of war now being planned and committed in and against the people and the sovereign State of Vietnam in pursuance of the newly-announced decisions of the Government of the United States of America.
To make my case for a prima facie ruling in favour of an urgent debate I have to show that the matter is definite and urgent, that it arises out of a partly new situation and that it involves the responsibility of Her Majesty's Government.
That the matter is definite is clear from the wording of my proposal. I do not think that anybody would doubt that acts of war are being planned or committed in or against the State of Vietnam.
As to whether or not there have been any new developments in the situation, I must take into account the fact that—and I regret that the right hon. Gentleman the Leader of the Opposition has left the Chamber—

Hon. Members: What about the Prime Minister?

Mr. Warbey: I shall be making a specific reference to the Leader of the Opposition since, in so far as there is a continuing situation in Vietnam, it arises to a large extent out of commitments entered into by the Leader of the Opposition when he was—

Mr. Speaker: Order. The hon. Gentleman may make his application if he pleases, but he cannot make it an occasion for attacks upon other hon. or right hon. Gentlemen.

Mr. Warbey: With respect, Mr. Speaker, the Leader of the Opposition made an attack on me during Question Time and has now left the Chamber. This is quite germane to the Motion, because it is germane to the question whether or not this is a continuing situation and whether there have been any significant new developments and changes in the situation. I was merely saying that there is a continuing element arising out of the commitments made by the previous Government.
I submit that there have been significant new developments which have actually taken place while the House was in recess. These new developments amount to a public statement by the United States Government that the


American forces in Vietnam are to be used—indeed, are being used—in a combat rôle in Vietnam. The statement—and I have the text of the official White House statement with me—is to the effect that the primary rôle of these troops is to defend American air bases and other installations. Of course, the establishment of such installations is in itself an act of war.
Secondly, the defence of those installations by foreign troops is an act of war. Thirdly, the permission given to the American commander to use those troops to make war against the forces of the Liberation front in South Vietnam is also an act or threat of war. In addition, the Americans have announced that they are to build a naval base at Cam Ranh in South Vietnam. This, also, is a new development.
Finally, the latest new development is that there has been in the last day or two an overthrow of the civilian Government in Saigon by a military coup d'état and its replacement by a puppet military régime which has no authority over the country, which has no popular support and which, therefore, is not a legitimate Government capable of calling upon the American forces for assistance.
This, I say, is the answer to the point made by my right hon. Friend the Foreign Secretary in his written reply to my Question yesterday. These are four new elements, and I therefore raise them at the first opportunity.
It is clear that Her Majesty's Government have certain responsibilities in this matter. They have already accepted a general responsibility for the activities of the S.E.A.T.O. Council and of S.E.A.T.O. in this area. They have accepted a responsibility for endeavouring to engage in peace-making activities in Vietnam. They have also a general responsibility before the United Nations to call the attention of the United Nations—hon. Members opposite do not appear to be particularly interested in a matter—[Interruption.]

Mr. Speaker: Order. Let there be no bothers of that sort. Let the hon. Member make his application.

Mr. Warbey: I hope that hon. Members opposite will recognise that the whole of the British people are concerned at this

moment about the possibility that Britain, if we are not very careful, might before long be engaged in a war in South East Asia, and a war on the wrong side—[HON. MEMBERS: "Oh."] If hon. Members opposite do not like that remark, they will have the opportunity to say so when we debate the matter—

Mr. Speaker: Yes, but the hon. Gentleman must not say things like that until we have the opportunity of debate. If he will allow me to say so, he should not now make the speech that he could make were his application to be acceded to.

Mr. Warbey: I recognise that, Mr. Speaker, but I have to make my case that there is a need for an urgent debate on this matter, and that it is not something that can be postponed. I have to make the case that Her Majesty's Government have a responsibility to act rightly in this matter. They have, in fact, not acted rightly, because, in the first place, in view of the fact that breaches of international peace have been committed in Vietnam, and are threatened not only in Vietnam, but in the surrounding areas, they have a clear duty, as a member of the Security Council of the United Nations, to refer this matter at the earliest opportunity to the United Nations so that the Security Council can decide upon the appropriate action to put an end to these acts of aggression or breaches of the peace.
It is the failure of Her Majesty's Government to take steps which necessitates an immediate debate so that this course can be urged upon them. It is too long to wait another week until we discuss the matter, because during the week of delay the prestige and authority of the United Nations itself will be weakened, as, also, will be the prestige and authority of Her Majesty's Government. I do not want to see either of those things happen, nor does this House, nor, I believe, do the people of this country.
It is for that reason that I take the view—and I hope that you will take the view, Mr. Speaker—that this is a matter which requires urgent debate which should take place this day.

Mr. Speaker: Perhaps the hon. Gentleman will be good enough to bring me his Motion.
The hon. Member seeks leave to move the Adjournment of the House under Standing Order No. 9 for the purpose of discussing a definite matter of urgent public importance, namely:
the failure of Her Majesty's Government to take immediate action, through the United Nations, to stop the new acts of war now being planned and committed in and against the people and the sovereign State of Vietnam in pursuance of the newly-announced decisions of the Government of the United States of America.
I fully understand the anxieties of the hon. Gentleman, but I could not hold that to be within the Standing Order, save in defiance of precedent.

Mr. Warbey: With respect, Mr. Speaker, perhaps you would be kind enough to enlarge upon that Ruling, because you referred to my anxieties in the matter. My anxieties, I may say—

Mr. Speaker: Order. I referred to the hon. Gentleman's anxieties out of courtesy, and to indicate my sympathy with him. I do not propose to elaborate my reasons. If he looks back at the 1959 Report on Procedure he will see in page xix what the Committee thought about some of the restrictions on the Speaker's discretion in those matters which have been effected by precedent. It suggested, indeed, that where action in pursuance of United Nations obligations arose the practice might be loosened up, but the House refrained from adopting that suggestion, so I am bound by what the Ruling was before. I do not propose to elaborate it more than that, because it is familiar.

ABORTION

4.7 p.m.

Mrs. Renée Short: I beg to move,
That leave be given to bring in a Bill to amend the law on abortion.
I seek to introduce a Bill, supported by hon. Members of all parties in the House, that would put into statutory form what is now established case law on abortion, and would provide that a registered medical practitioner might lawfully terminate a pregnancy at the request of a patient or her guardian when it was necessary for preserving the health or life of the woman; when there was serious risk of a defective child being born, and when the pregnancy resulted from a sexual offence.
Reform of this kind has been advocated over many decades by many organisations, including the British Medical Association, the Magistrates' Association, the Townswomen's Guild, the Women's Co-operative Guild, the Family Planning Association, the Abortion Law Reform Association, Rotary clubs, the Federation of University Women and many other progressive and enlightened bodies.
The medical termination of pregnancy is legal on these grounds in very many countries where it is done easily and without risk to the patient in the early stages of pregnancy. New techniques make it possible for it to be accomplished without surgical intervention, and in some of these countries the back street abortionist has either largely or entirely disappeared. Contrary to what many opponents of my Bill claim, there has been no increase in promiscuity there. I have visited hospitals in those countries, where this practice is carried out simply and swiftly. For many years I have observed in this country, as a member of a hospital management committee, the cost in human life, in misery, in unhappiness and in money that the present unsatisfactory and confused legal position causes.
I pay tribute as a woman to those countless devoted campaigners—laymen as well as members of the medical and legal professions, some of whom are in this House today—who, for many decades, have been striving for a reform of the statute law on this subject. The


law up to 1803 permitted the medical termination of pregnancy. The law enacted in 1861 has remained unchanged since that time, 104 years ago, and makes it a felony unlawfully to administer drugs or to use instruments to procure an abortion. For a long time the termination of pregnancy for the purpose of saving the life of the mother has been regarded as the exception to this rule by the courts.
In 1939, that case law was extended to include the mother's health as well as her life. This arose from the celebrated Bourne judgment and was later reinforced in 1948 in the case of Rex v. Bergman and Ferguson. However, many cases have occurred which demonstrate the confusion and uncertainty which exists. In 1949, for example, a husband living in distressing conditions with his wife and two children attempted to abort his wife who died as a result. He was sentenced to five years' imprisonment. Mercifully, Lord Justice Goddard, in the Court of Criminal Appeal, discharged the defendant. But in 1961 a doctor whom the trial judge described as clever and not slovenly in the attention he bestowed on those who sought his help was sent to prison for six years.
There are variations in judicial attitudes in ordinary crimes, but these appear to be accentuated in abortion cases, depending on the outlook of the judge. While some lawyers may feel that the present case law based on Rex v. Bourne is quite clear, evidence shows without doubt that the medical profession, those most involved, is by no means equally clear about its members' position. The result is that inevitably different interpretations of case law are made in different hospitals and practices to the severe detriment of women and children. A minority of gynaecologists will terminate in the hospital without subterfuge and in accordance with recognised procedures of the profession, but most doctors are too apprehensive of the legal position to perform the operation at all. There is no doubt that the medical profession requires the clarification which a Bill of the kind I seek to introduce would bring and that the majority would support it.
The Abortion Law Reform Association carried out a most valuable survey at the

beginning of this year among doctors in the London area. Of those replying, 53 per cent. said it was difficult or uncertain to know when termination was legal, 89 per cent. said they approved the changes in the law proposed by the Association which I am supporting today, 84 per cent. said it would be quite safe, 57 per cent. thought that to compel a woman to bear a child against her will causes more psychological harm than hospital termination.
These figures show a considerable shift in medical opinion during recent years and should be given considerable weight by hon. and right hon. Members in this House. My hon. Friend the Member for Wandsworth, Central (Dr. David Kerr) drew the attention of the House recently to the rise in illegitimate births from 60,000 in 1962 to 68,000 in 1964. The Department of Education and Science gives the number of illegitimate births to girls under the age of 16 at 220 in 1941 and 1,131 in 1963, a fivefold increase in 20 years. If we accept that this situation is the responsibility of society as a whole, as surely we must, it must also be wrong to expect them alone to bear the penalty of a blighted life.
It has been estimated that there are about 100,000 illegal abortions a year, a terrible pool of human misery and unhappiness. The figure may well be higher, for there is a considerable amount of camouflage on medical certificates. Some of these abortions are brought about by women themselves using terrifying instruments to bring abortion about. Can the House stand a recital of the desperate lengths to which frightened women will go to prevent the continuation of an unwanted pregnancy? I quote from a report published in 1939 by the Government Abortion Committee:
Things inserted in the womb, often with disastrous consequences, included knitting and darning needles, crochet and button hooks, pencils, scissors and hairpins, disinfectants, washing soda and other irritants, drugs which frequently damage the foetus without killing it, and other violent methods.
Then there are those women who go to back-street abortionists and who have similar terrifying interference carried out in ghastly and dirty conditions. Damage is done to the unborn child, deformed babies often result, and sterility, and very frequently death. Then there are those fortunate women who can


have a termination carried out properly in aseptic conditions either because they have found a sympathetic surgeon in hospital, or because they know where to go and have the money for secret, expensive termination in a private clinic or nursing home. After two or three days that woman can return home and resume her normal life.
The results of self-induced or backstreet abortions come to our hospitals for the damage to be put right. It can take two or three weeks and it costs about £33 per patient per bed per week. The House can work out the comparative cost between two or three days and two or three weeks. With the septic cases there is a disproportionate strain on scarce medical and nursing skill. They need more nursing, more drugs, more blood transfusions. In 1962, the London Emergency Bed Service was asked to find beds for 5,734 abortion cases, an increase of 40 per cent. over the past eight years. The consultant gynaecologist at one of our most famous teaching hospitals told me only last week that in 1959 his department cared for 138 abortion cases. By 1963, that figure had risen to 274. It had doubled in four years and 192 of those were probably self-induced or criminal abortions.
Abortion is the second most common cause of maternal death; 61 per cent. are procured by the patient herself, 22 per cent. of deaths from this cause occur among women with four or more children—think what happens to those children—and almost 90 per cent. of women having abortions are married. Since my right hon. Friend the Minister of Health attempted to introduce his own Private Member's Bill in 1961, the thalidomide tragedy has occurred. This adds urgency to the need for reform. It caused a great shift in public opinion.
As recently as last March a National Opinion Poll carried out in depth on abortion law showed that almost three-quarters of the people of this country—just over 72 per cent.—are in favour of reform on the lines I have suggested. Seventy-five per cent. of Church of England people interviewed were in favour, 68 per cent. of Nonconformists, 75 per cent. of Presbyterians and 60 per cent. of Catholics were all in favour. Seventy per cent. of those interviewed thought there should be no punishment at all for

doctors who carried out abortions which they believed morally justified.
The religious divisions on this question were equally interesting. Seventy per cent. of Church of England members, 68 per cent. of Nonconformists, 73 per cent. of Presbyterians, and 63 per cent. of Catholics thought there should be no punishment of the doctor. If one believed Catholic writers to the Press, one would get a very different impression of Catholic opinion. I believe that the House, too, must give considerable weight to this shift in public opinion.
I have had very many letters from individuals and from organisations welcoming the reform which I hope to initiate. I have not had one letter of protest, either from an individual or from an organisation. I was greatly heartened by the resolution which was carried recently by the annual conference of the Townswomen's Guild in favour of reform. The conference represented over 200,000 women. It is my belief, therefore, that only a very small minority of people would oppose reform on religious grounds, but that small minority can no longer be permitted to impose its views on the majority. This would be the negation of democracy.
If a foetus can be aborted spontaneously up to the 28th week of pregnancy without the Church or State being concerned, without a birth having to be registered, without a burial service having to be held, if that seven-month foetus can be buried in the back garden or burned in a hospital incinerator, why should there be opposition to the safe termination of pregnancy up to 13 weeks on properly defined grounds? I therefore hope that the House, with its great tradition of humanitarianism and reform, will allow the Bill to be presented and will facilitate its passage.

Question put and agreed to.

Bill ordered to be brought in by Mrs. Short, Mr. Wingfield Digby, Mr. William Hamilton, Mr. William Hamling, Dr. David Kerr, Mr. Marcus Lipton, Mr. Eric Lubbock, Mr. Laurence Pavitt, and Dame Joan Vickers.

ABORTION BILL

Bill to amend the law on abortion, presented accordingly and read the First time; to be read a Second time on Friday, 2nd July, and to be printed. [Bill 158.]

Orders of the Day — FINANCE (No. 2) BILL

Considered in Committee [Progress 3rd June].

[Dr. HORACE KING in the Chair]

Clause 51.—(COMPUTATION OF CHARGEABLE GAINS.)

4.23 p.m.

The Chairman: Amendment No. 599 is not selected, but can be discussed later, when we reach Clause 54, with Amendment No. 318.

Question put, That the Clause stand part of the Bill:—

The Committee divided: Ayes 223, Noes 216.

Division No. 171.]
AYES
[4.24 p.m.


Abse, Leo
Foot, Michael (Ebbw Vale)
Manuel, Archie


Albu, Austen
Fraser, Rt. Hn. Tom (Hamilton)
Mapp, Charles


Allaun, Frank (Salford, E.)
Freeson, Reginald
Mason, Roy


Alldritt, Walter
Galpern, Sir Myer
Maxwell, Robert


Allen, Scholefield (Crewe)
Garrett, W. E.
Mellish, Robert


Armstrong, Ernest
Garrow, A.
Mendelson, J. J.


Atkinson, Norman
Gourlay, Harry
Millan, Bruce


Bacon, Miss Alice
Gregory, Arnold
Miller, Dr. M. S.


Bagier, Gordon A. T.
Grey, Charles
Milne, Edward (Blyth)


Barnett, Joel
Griffiths, David (Rother Valley)
Molloy, William


Baxter, William
Griffiths, Rt. Hn. James (Llanelly)
Monslow, Walter


Beaney, Alan
Hamilton, James (Bothwell)
Morris, Alfred (Wythenshawe)


Bellenger, Rt. Hn. F. J.
Hamilton, William (West Fife)
Morris, Charles (Openshaw)


Bence, Cyril
Hannan, William
Morris, John (Aberavon)


Blackburn, F.
Harrison, Walter (Wakefield)
Newens, Stan


Blenkinsop, Arthur
Hart, Mrs. Judith
Noel-Baker,Rt.Hn.Philip(Derby,S.)


Boardman, H.
Hattersley, Roy
Norwood, Christopher


Bowden, Rt. Hn. H. W. (Leics S.W.)
Hazell, Bert
Oakes, Gordon


Bray, Dr. Jeremy
Healey, Rt. Hn. Denis
Ogden, Eric


Broughton, Dr. A. D. D.
Heffer, Eric S.
O'Malley, Brian


Brown, Rt. Hn. George (Belper)
Henderson, Rt. Hn. Arthur
Oram, Albert E. (E. Ham, S.)


Brown, Hugh D. (Glasgow, Provan)
Hobden, Dennis (Brighton, K'town)
Orme, Stanley


Brown, R. W. (Shoreditch &amp; Fbury)
Holman, Percy
Oswald, Thomas


Buchan, Norman (Renfrewshire, W.)
Horner, John
Owen, Will


Buchanan, Richard
Houghton, Rt. Hn. Douglas
Page, Derek (King's Lynn)


Butler, Herbert (Hackney, C.)
Howarth, Harry (Wellingborough)
Paget, R. T.


Callaghan, Rt. Hn. James
Hoy, James
Palmer, Arthur


Carmichael, Neil
Hughes, Emrys (S. Ayrshire)
Park, Trevor (Derbyshire, S.E.)


Carter-Jones, Lewis
Hughes, Hector (Aberdeen, N.)
Parker, John


Castle, Rt. Hn. Barbara
Hunter, A. E. (Feltham)
Pavitt, Laurence


Chapman, Donald
Irving, Sydney (Dartford)
Pearson, Arthur (Pontypridd)


Coleman, Donald
Jackson, Colin
Pentland, Norman


Conlan, Bernard
Janner, Sir Barnett
Perry, Ernest G.


Cousins, Rt. Hn. Frank
Jay, Rt. Hn. Douglas
Popplewell, Ernest


Craddock, George (Bradford, S.)
Jeger, George (Goole)
Price, J. T. (Westhoughton)


Crawshaw, Richard
Jeger,Mrs.Lena(H'b'n'St.P'cras,S.)
Probert, Arthur


Crosland, Rt. Hn. Anthony
Jenkins, Rt. Hn. Roy (Stechford)
Pursey, Cmdr. Harry


Crossman, Rt. Hn. R. H. S.
Johnson,James(K'ston-on-Hull,W.)
Randall, Harry


Cullen, Mrs. Alice
Jones, Dan (Burnley)
Rankin, John


Dalyell, Tam
Jones, J. Idwal (Wrexham)
Rees, Merlyn


Darling, George
Jones, T. W. (Merioneth)
Rhodes, Geoffrey


Davies, G. Elfed (Rhondda, E.)
Kelley, Richard
Roberts, Goronwy (Caernarvon)


Davies, Ifor (Gower)
Kenyon, Clifford
Robertson, John (Paisley)


Davies, S. O. (Merthyr)
Kerr, Mrs. Anne (R'ter &amp; Chatham)
Robinson, Rt. Hn.K.(St. Pancras.N.)


de Freitas, Sir Geoffrey
Lawson, George
Rogers, George (Kensington, N.)


Delargy, Hugh
Leadbitter, Ted
Rose, Paul B.


Diamond, Rt. Hn. John
Lee, Miss Jennie (Cannock)
Ross, Rt. Hn. William


Dodds, Norman
Lever, Harold (Cheetham)
Rowland, Christopher


Doig, Peter
Lipton, Marcus
Sheldon, Robert


Donnelly, Desmond
Lomas, Kenneth
Shinwell, Rt. Hn. E.


Duffy, Dr. A. E. P.
Mabon, Dr. J. Dickson
Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)


Dunn, James A.
McBride, Neil
Short, Mrs. Renée (W'hampton,N.E.)


Edelman, Maurice
McCann, J.
Silverman, Julius (Aston)


Edwards, Rt. Hn. Ness (Caerphilly)
MacColl, James
Silverman, Sydney (Nelson)


Edwards, Robert (Bilston)
MacDermot, Niall
Slater, Mrs. Harriet (Stoke, N.)


Ennals, David
McGuire, Michael
Slater, Joseph (Sedgefield)


Ensor, David
McInnes, James
Small, William


Evans, Ioan (Birmingham, Yardley)
McKay, Mrs. Margaret
Snow, Julian


Fernyhough, E.
Mackenzie, Gregor (Rutherglen)
Solomons, Henry


Finch, Harold (Bedwellty)
McLeavy, Frank
Soskice, Rt. Hn. Sir Frank


Fitch, Alan (Wigan)
MacMillan, Malcolm
Steele, Thomas (Dunbartonshire, W.)


Fletcher, Sir Eric (Islington, E.)
Mahon, Peter (Preston, S.)
Storehouse, John


Fletcher, Ted (Darlington)
Mahon, Simon (Bootle)
Stones, William


Fletcher, Raymond (Ilkeston)
Mallalieu,J.P.W.(Huddersfield,E.)
Strauss, Rt. Hn. G. R. (Vauxhall)




Summerskill, Hn. Dr. Shirley
Urwin, T. W.
Williams, Alan (Swansea, W.)


Swain, Thomas
Varley, Eric G.
Williams, Albert (Abertillery)


Swingler, Stephen
Wainwright, Edwin
Williams, Mrs. Shirley (Hitchin)


Symonds, J. B.
Walden, Brian (All Saints)
Williams, W. T. (Warrington)


Taylor, Bernard (Mansfield)
Walker, Harold (Doncaster)
Willis, George (Edinburgh, E.)


Thomas, George (Cardiff, W.)
Warbey, William
Wilson, William (Coventry, S.)


Thomas, Iorwerth (Rhondda, W.)
Watkins, Tudor
Winterbottom, R. E.


Thomson, George (Dundee, E.)
Weitzman, David
Woof, Robert


Thornton, Ernest
White, Mrs. Eirene
Zilliacus, K.


Tinn, James
Whitlock, Wiliam



Tomney, Frank
Willey, Rt. Hn. Frederick
TELLERS FOR THE AYES:




Mr. Harper and Mr. Howie.




NOES


Agnew, Commander Sir Peter
Fraser, Ian (Plymouth, Sutton)
Miscampbell, Norman


Anstruther-Gray, Rt. Hn. Sir W.
Gammans, Lady
Mitchell, David


Astor, John
Gardner, Edward
Monro, Hector


Atkins, Humphrey
Gibson-Watt, David
More, Jasper


Awdry, Daniel
Gilmour, Ian (Norfolk, Central)
Morrison, Charles (Devizes)


Baker, W. H. K.
Gilmour, Sir John (East Fife)
Mott-Radclyffe, Sir Charles


Barber, Rt. Hn. Anthony
Glover, Sir Douglas
Munro-Lucas-Tooth, Sir Hugh


Barlow, Sir John
Goodhew, Victor
Murton, Oscar


Batsford, Brian
Gower, Raymond
Nicholson, Sir Godfrey


Bell, Ronald
Grant, Anthony
Noble, Rt. Hn. Michael


Bennett, Sir Frederick (Torquay)
Gresham Cooke, R.
Nugent, Rt. Hn. Sir Richard


Bennett, Dr. Reginald (Gob &amp; Fhm)
Griffiths, Peter (Smethwick)
Onslow, Cranley


Berry, Hn. Anthony
Grimond, Rt. Hn. J.
Orr, Capt. L. P. S.


Bessell, Peter
Gurden, Harold
Osborne, Sir Cyril (Louth)


Biffen, John
Hall, John (Wycombe)
Page, John (Harrow, W.)


Biggs-Davison, John
Hall-Davis, A. G. F.
Page, R. Graham (Crosby)


Bingham, R. M.
Hamilton, Marquess of (Fermanagh)
Pearson, Sir Frank (Clitheroe)


Birch, Rt. Hn. Nigel
Hamilton, M. (Salisbury)
Peel, John


Black, Sir Cyril
Harris, Reader (Heston)
Percival, Ian


Blaker, Peter
Harrison, Brian (Maldon)
Peyton, John


Bowen, Roderic (Cardigan)
Harvey, Sir Arthur Vere (Macclesf'd)
Pickthorn, Rt. Hn. Sir Kenneth


Boyd-Carpenter, Rt. Hn. J.
Harvey, John (Walthamstow, E.)
Pitt, Dame Edith


Boyle, Rt. Hn. Sir Edward
Heald, Rt. Hn. Sir Lionel
Pounder, Rafton


Brewis, John
Heath, Rt. Hn. Edward
Powell, Rt. Hn. J. Enoch


Brinton, Sir Tatton
Hendry, Forbes
Price, David (Eastleigh)


Bromley- Davenport, Lt. -Col. Sir Walter
Higgins, Terence L.
Pym, Francis


Brooke, Rt. Hn. Henry
Hiley, Joseph
Ramsden, Rt. Hn. James


Brown, Sir Edward (Bath)
Hill, J. E. B. (S. Norfolk)
Redmayne, Rt. Hn. Sir Martin


Bruce-Gardyne, J.
Hobson, Rt. Hn. Sir John
Renton, Rt. Hn. Sir David


Bryan, Paul
Hooson, H. E.
Ridley, Hn. Nicholas


Bullus, Sir Eric
Hordern, Peter
Ridsdale, Julian


Buxton, Ronald
Hornby, Richard
Roberts, Sir Peter (Heeley)


Campbell, Gordon
Hornsby-Smith, Rt. Hn. Dame P.
Royle, Anthony


Carr, Rt. Hn. Robert
Hunt, John (Bromley)
St. John-Stevas, Norman


Cary, Sir Robert
Hutchison, Michael Clark
Scott-Hopkins, James


Channon, H. P. G.
Irvine, Bryant Godman (Rye)
Sharples, Richard


Chataway, Christopher
Jenkin, Patrick (Woodford)
Shepherd, William


Chichester-Clark, R.
Jennings, J. C.
Sinclair, Sir George


Clark, Henry (Antrim, N.)
Johnston, Russell (Inverness)
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Clark, William (Nottingham, S.)
Jopling, Michael
Smyth, Rt. Hn. Brig. Sir John


Cole, Norman
Joseph, Rt. Hn. Sir Keith
Soames, Rt. Hn. Christopher


Cooke, Robert
Kaberry, Sir Donald
Spearman, Sir Alexander


Cooper-Key, Sir Neill
Kerby, Capt. Henry
Stainton, Keith


Contain, A. P.
Kershaw, Anthony
Steel, David (Roxburgh)


Craddock, Sir Beresford (Spelthorne)
Kilfedder, James A.
Studholme, Sir Henry


Crawley, Aidan
King, Evelyn (Dorset, S.)
Summers, Sir Spencer


Crosthwaite-Eyre, Col. Sir Oliver
Kirk, Peter
Taylor, Sir Charles (Eastbourne)


Crowder, F. P.
Lambton, Viscount
Taylor, Edward M. (G'gow,Cathcart)


Cunningham, Sir Knox
Lancaster, Col. C. G.
Taylor, Frank (Moss Side)


Curran, Charles
Legge-Bourke, Sir Harry
Teeling, Sir William


Currie, G. B. H.
Lewis, Kenneth (Rutland)
Temple, John M.


Dalkeith, Earl of
Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfield)
Thomas, Sir Leslie (Canterbury)


Davies, Dr. Wyndham (Perry Barr)
Lloyd, Ian (P'tsm'th, Langstone)
Thompson, Sir Richard (Croydon,S.)


d'Avigdor-Goldsmid, sir Henry
Longbottom, Charles
Thorneycroft, Rt. Hn. Peter


Dean, Paul
Lubbock, Eric
Thorpe, Jeremy


Deedes, Rt. Hn. W. F.
McAdden, Sir Stephen
Tiley, Arthur (Bradford, W.)


Digby, Simon Wingfield
Mackle, George Y. (C'ness &amp; S'land)
Tilney, John (Wavertree)


Dodds-Parker, Douglas
Maclean, Sir Fitzroy
Turton, Rt. Hn. R. H.


Doughty, Charles
McMaster, Stanley
Tweedsmuir, Lady


Eden, Sir John
Maginnis, John E.
van Straubenzee, W. R.


Elliot, Capt. Walter (Carshalton)
Marples, Rt. Hn. Ernest
Vaughan-Morgan, Rt. Hn. Sir John


Elliott, R. W.(N'c'tle-upon-Tyne,N.)
Marten, Neil
Vickers, Dame Joan


Emery, Peter
Mathew, Robert
Walder, David (High Peak)


Errington, Sir Eric
Maude, Angus
Walker, Peter (Worcester)


Eyre, Reginald
Mawby, Ray
Wall, Patrick


Fisher, Nigel
Maxwell-Hyslop, R. J.
Walters, Dennis


Fletcher-Cooke, Charles (Darwen)
Maydon, Lt.-Cmdr. S. L. C.
Ward, Dame Irene


Fletcher-Cooke, Sir John (S'pton)
Meyer, Sir Anthony
Weatherill, Bernard


Foster, Sir John
Mills, Peter (Torrington)
Webster, David







Wells, John (Maidstone)
Wolrige-Gordon, Patrick



Whitelaw, William
Woodhouse, Hon. Christopher
TELLERS FOR THE NOES:


Williams, Sir Rolf Dudley (Exeter)
Wylie, N. R.
Mr. McLaren and


Wills, Sir Gerald (Bridgwater)
Younger, Hn. George
Mr. MacArthur.


Wilson, Geoffrey (Truro)

Clause 52.—(DEDUCTIONS AND ADDITIONS IN COMPUTATION OF PROFITS FOR CAPITAL ALLOWANCES AND RELATED CHARGES.)

Mr. Anthony Barber: I beg to move Amendment No. 320, in page 63, line 25, at the end to insert:
Provided always that the expenditure in respect of which investment allowances are calculated shall for the purpose of corporation tax be deemed to be increased by 40 per cent.

The Chairman: It would be for the convenience of the Committee if we took with this Amendment, Amendment 321, in line 25, at end insert:
Provided always that the expenditure incurred in the provision of new machinery or plant for use in a development district in respect of which investment allowances are calculated shall for the purpose of corporation tax be deemed to be increased by 40 per cent.
Amendment No. 322, in line 25, at end insert:
Provided always that the expenditure on the provision of ships in respect of which investment allowances are calculated shall for the purpose of corporation tax be deemed to be increased by 40 per cent.
Amendment No. 534, in line 25, at end insert:
Provided always that the expenditure in Scotland in respect of which investment allowances are calculated shall for the purpose of corporation tax be deemed to be increased by 40 per cent.
and New Clause No. 32—Increased investment allowances on ships:
For the purposes of corporation tax investment allowances in respect of expenditure incurred after 5th April 1965 on the provision of a ship shall be increased by 40 per cent. and accordingly in relation to expenditure incurred after that date for the reference in section 15 of the Finance Act 1957 to two-fifths there shall be substituted a reference to fourteen-twenty-fifths.
The said increase of investment allowances shall extend to all expenditure incurred by a company the accounting period of which commenced after 5th April 1964 and ended after 5th April 1965, and where expenditure was incurred in that accounting period it shall, for the purposes of this subsection, be deemed to have been incurred after 5th April 1965.
Provided that this section shall apply only where the expenditure is to be treated for the purposes of subsection (3) of section 16 of the Finance Act 1954 as incurred after

the relevant date and is not to be so treated by virtue only of subsection (2) of section 279 of the Income Tax Act 1952.
I have been asked by the right hon. Member for Bexley (Mr. Heath) whether I would permit a Division if necessary when the time comes on Amendments Nos. 321, 322 and 534.

Mr. Barber: This is the first Amendment to be considered since the announcement of the Birthday Honours. At the risk of a deliberate excursion into a matter which is wholly out of order, I know that it would be the wish of the whole Committee to convey to you, Dr. King, our congratulations and good wishes on your becoming a Privy Councillor. In this Committee you are at once our master and our servant here and I hope that during the remainder of our labours on the Bill we shall be able to say, with William Blackstone, that
the king can do no wrong …
Since you have allowed me to stray this far, Dr. King, you can hardly call me to order for also saying, on personal grounds, and also in virtue of his high office, that we extend our congratulations to the Chief Secretary to the Treasury. In his case I would only add the words of Isaak Newton to his faithful but most destructive dog which happened to be known by the name of "Diamond":
Oh Diamond! Oh Diamond! Thou little knowest the mischief thou hast done.
The purpose of these Amendments is simply to put right some of the mischief done and to do so by restoring the cash value of the investment allowances.
Amendment No. 320 sets out to do this finite generally across the board. Amendment No. 321 sets out to do this in the case of development districts only. Amendment No. 323 is limited to ships only, and Amendment No. 534 is limited to expenditure in Scotland. Amendment No. 320 raises the general arguments. Whatever view the Chancellor of the Exchequer may take concerning the degree of incentive provided by investment allowances, nobody would deny their actual value in terms of cash. Perhaps I can explain what I mean by giving a simple example.
An expenditure of £1,000 on an asset which qualifies for investment allowance carries with it, in effect, a licence to make £300 of profits, tax free. That means that at present with Income Tax at the standard rate of 8s. 3d. and Profits Tax of 15 per cent. it is equivalent to a tax free subsidy of £168 15s. or of a subsidy which is chargeable to tax of £384 14s. I am the last person to suggest that the system of investment allowances must stand without modification for all time, but the Chancellor's action this year seems to me to be wholly without justification. I will explain why in a moment. The reason the cash value of investment allowances will be substantially reduced is that, in future, they will be allowable only against the Corporation Tax at 40 per cent. or 35 per cent. and not against the 56¼ per cent. present composite rate of Income Tax and Profits Tax.
The reasons given by the Chancellor for accepting this situation and cutting the value of the investment allowances are two. First, he says that he doubts that investment allowances are an effective incentive to investment. Secondly, he says that there is no reason to increase the allowances whenever taxation is reduced. Both these reasons are bogus. Already, this particular aspect of the Corporation Tax is slowing down the modernisation of many companies. As for the incentive argument to which the right hon. Gentleman has referred, the truth is, as he admitted in his Budget speech, that he cannot make up his mind on the point. He said:
I have set myself the task of looking into the whole question in the forthcoming year."—[OFFICIAL REPORT, 6th April, 1965; Vol. 710, c. 257.]
In passing, I observe that he had better "get cracking", because he may well not have as long as a year to carry out his investigations. But that is by the way.
Yesterday, we had a most significant intervention on the subject of investment allowances by the Minister of Technology. In reply to a question about investment allowances from one of my hon. Friends, the right hon. Gentleman said:
This subject is under review between the Chancellor's Department and my own Department. We recognise the value of this incentive."—[OFFICIAL REPORT, 14th June, 1965; Vol. 714, c. 39.]
It has been obvious for some time that the Chancellor of the Exchequer and

the First Secretary of State are at logger-heads over economic policy, but we have now, apparently, reached the stage when the Minister of Technology is prepared publicly to state a view on taxation which conflicts with that expressed only a few weeks ago by the Chancellor. It is an incredible situation.
If the Chancellor was not sure about the effectiveness of the investment allowances, which is what he said, the sensible course would have been to defer action until he was sure one way or the other. In support of his doubts, the right hon. Gentleman cited the Report of the Richardson Committee and the advice of the Management Consultants' Association. But why has he been so selective? Why not refer to the accountants, who take a different view? Why not refer to the Federation of British Industries, which also takes a different view? Why not take into account the views of some of the major industrial companies in Britain? The truth is that this is another example of the Chancellor not having the slightest idea of the practical consequences of his own proposals.
Here is an extract from a report of a speech made by the chairman of Swan Hunter:
Industries faced with serious and often subsidised international competition can now plough back little, if any, profit, and the contemplated reduction in the value of investment allowances would be an added disadvantage to the group in extending the modernisation programme. Naturally the effect of the allowances has been brought into the calculation of the cost of major improvements and the financial returns to be expected from them. And if the expected contribution from capital allowances were to be reduced, binding commitments entered into would 'be less beneficial and further contemplated expansion might well prove impractical'.
Does this mean nothing to the Chancellor? One could produce many quotations to the same effect.
Here is one more, coming from a newspaper report of a speech by the chairman of A.E.I. It is said that
Mr. Wheeler does not share the Chancellor's doubts as to the effect of investment allowances and regrets the decision not to offset the fall in their value by at least 25 per cent. because of the introduction of Corporation Tax. He feels that these allowances do influence industrial decisions on investment, and in view of the country's crying need for investment to raise productivity, he thought it most unwise to weaken or remove investment incentives.


But no—the Chancellor of the Exchequer refused to budge.
4.45 p.m.
What of the Federation of British Industries? On this particular matter, the Chancellor has wholly ignored its advice. Last month, the president of the F.B.I. wrote a letter to the Chancellor about the Finance Bill and, among other things, he dealt with the question of investment allowances. As this view is representative of industry generally, I think it right that the Committee should know what he said:
If corporation tax is set at about 35 per cent., the value to industry of the investment allowances will be reduced by about £100 million, or about one-third. Her Majesty's Government and British industry are at one in the belief that we must press forward with modernisation, improvement and innovation. The reduction in the value of the investment allowances must hinder this. We know that evidence has been produced purporting to show that the allowances have little or no bearing upon investment decisions. We believe that this evidence is of doubtful reliability, except to the extent that the various changes which have been made from time to time in the rates of the allowances have caused industry to be uncertain of their future. But, if there is substance in it, what is needed is not the reduction of the allowances but a campaign of education to show industry their worth, which we will be happy to mount or support.
But no—once again, the Chancellor is impervious to the advice given to him by those with experience.
If the Chancellor's argument about the incentive effect of the investment allowances is in doubt, his other argument is really nonsense. This is what he said in his Budget speech, under the heading "Investment Allowances":
Many of the representations I have received have pointed out that at a figure of 35 to 40 per cent. the reduction in the rate of tax charged on company profits will mean that the value of investment allowances is diminished; some have suggested that the rate of allowance should be increased to compensate for this. It is, of course, true as a piece of arithmetic that the lowering of the rate of any tax does in one sense reduce the value of any relief given from that tax. But that is not a reason for increasing the relief every time the tax is reduced."—[OFFICIAL REPORT, 6th April, 1965, Vol. 710, cc. 256–7.]
What does the Chancellor mean by talking of reducing taxes? The conjoint effect of a 40 per cent. Corporation Tax and a standard rate of Income Tax at

8s. 3d. in the £ will inevitably be that the tax burden on industry will be considerably greater than it is at present. If the Labour Government had actually reduced the standard rate of Income Tax and retained the Profits Tax at its present level, no one in his right senses would have demanded a compensating increase in the investment allowances. But we are presented with a change to Corporation Tax which the Chancellor himself calls
the most fundamental of the tax reforms in this Budget."—[OFFICIAL REPORT, 6th April, 1965; Vol. 710, c. 254.]
It is not a mere change of rates, and the Chancellor's reasoning on this point is pure sophistry. The truth is that what he himself admits to be the diminished value of investment allowances is bound to inhibit the modernisation of industry to which the Prime Minister continually pays lip-service.
Businessmen are getting fed up with the continuous barrage of appeals to modernise, made by a Chancellor whose main contribution so far has been to deal a body blow to British industry. Then, when those same businessmen have the effrontery to get up and complain, they are subjected by that captain of incompetence, the First Secretary of State, to the warning, "Don't bite the hand that feeds you". No wonder the managers of industry are getting "browned-off."
Even if the Government are not prepared to accept Amendment No. 320 perhaps they could accept Amendment No. 321. This also provides for the restoration of the cash value of investment allowances, but is limited to new machinery or plant for use in a development district. I hope that the Chief Secretary will at least accept the principle behind this Amendment, which is to provide a higher rate of investment allowances in the development districts.
Indeed, if the Government lead their supporters into the Lobby against Amendment No. 321 it will be, for reasons that I shall explain, a supreme example of political cynicism, because it is less than three years since the present Chancellor announced that a future Labour Government would provide a higher rate of investment allowances in development districts than elsewhere.
That was in 1962, in the course of a debate which lasted for several hours.
I hope that the Committee will take note of the precise proposal that the right hon. Gentleman then put before the Committee and the nation. I will quote what he said during a debate on a new Clause which was headed:
Increase of investment allowances for expenditure in development districts.
The right hon. Gentleman said:
The simple proposal here is that in the development districts there should be an increase in investment allowances in respect of industrial buildings, machinery and plant in order to give a fiscal encouragement to industry situated there to develop there and to encourage new industries to go there …
Some may raise the question whether we ought to use fiscal methods of this sort. Before the war they certainly would not have been considered, but I think that we have passed from the era when it was a belief in most industrial and commercial policy that taxation must bear equally on anyone wherever he was situated. In individual taxation we certainly adhere to that, but in company taxation there is no reason in principle or theory why we should not give fiscal incentives of this sort to clear up unemployment in these areas".
Now I want the Committee and the benches opposite, in particular, to mark the right hon. Gentleman's final words. After remarking on the drift of population to the London area, he concluded:
I am opposed to this"—
the drift to the South—
and I am sure that if the present Government have not the will to tackle it another Government will have to do so, and it will have to be an active policy of which this new Clause would form one part.
Where is the Chancellor's promise now? [HON. MEMBERS: "Where is he?"] I can only assume that the right hon. Gentleman must have appreciated the nature of the argument which inevitably would be put forward in support of our Amendments and has decided not to be here. One can search through the 200 pages of the Bill and nowhere is this proposal of his to be found. The truth is that the Chancellor's specific promise to the development districts was a cynical attempt to curry favour with a section of the electorate, many of whom no doubt assumed at the time that he was sincere.
That is all I propose to quote from that speech in 1962 of the Chancellor, except for one more gem. Remember that that debate was concerned solely

with investment allowances. These words of the right hon. Gentleman are particularly apposite at the present time. He said:
I should be out of order if I entered upon a discussion of the Government's incomes policy now and I propose to say no more than this. The proposal that incomes should keep pace with production is an obvious platitude which has been uttered by, I think, every Chancellor of the Exchequer since the end of the war. It does not of itself constitute a policy."—[OFFICIAL REPORT, 5th June, 1962; Vol. 661, c. 247–51.]
The right hon. Gentleman's words would certainly gladden the heart of Mr. George Woodcock. Even though the Chancellor apparently is not here, I hope that we shall have from the Chief Secretary a full and detailed explanation of why this specific promise to development districts has been broken. I had hoped that the Chancellor himself would have come here to answer the debate which concerns, as he must have known, a specific promise of his own, made at this Box.

Mr. Raymond Gower: Is not my right hon. Friend being unduly pessimistic? Does he believe that the Government are capable of such a cynical betrayal of development districts?

Mr. Barber: I hope that my worst fears will not prove to be true. It may well be that the Chief Secretary has been authorised to accept the Amendment. There is some significance in the fact that the Chancellor is not here, however, because I have noted that he generally turns up when there is something to give away. He leaves the remainder to the Chief Secretary and others. The fact that the Chancellor has not deigned to take part in this debate today confirms our impression, if I may purloin an apt phrase of the Prime Minister's at the weekend, that the Chancellor is the greatest of the non-playing Treasury captains.
Amendment No. 322 involves the same proposal as in the others but restricts it to investment allowances for ships. For years the Labour Party, in opposition, told us that it was the friend of the shipping and shipbuilding industries. Here, at least, is an opportunity for those on the benches opposite at the moment and the others who happen to be outside to show their mettle by supporting our proposal when we divide.
I think that no one on either side will deny the importance of the investment allowances to the shipping industry. There can be no doubt that the reduction in value of these allowances now proposed will be a grievous blow to many shipping companies which are having great difficulty in meeting foreign competition. In a desire to get on, I will leave it to some of my hon. Friends with special knowledge to elaborate the case for Amendment No. 322, but I point out the remarkable contrast between the treatment of the shipping industry in the last Parliament and the treatment which is now being meted out.
It is no exaggeration to say that the shipping industry is unique and it was precisely because if this that, in 1961, the then Conservative Chancellor gave an undertaking in his Budget Speech. He said:
… the General Council of British Shipping has suggested that it would be of help to shipping companies, in drawing up their future plans, to have a guarantee that the investment allowance will be retained at its present rate of 40 per cent. for a period of years. I can certainly state that I see no prospect of this special allowance for shipping being withdrawn or reduced during this Parliament."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 812.]
What a contrast that is with the attitude of the present Chancellor. In his first annual Budget, he has taken the opportunity of cutting the cash value of the investment allowance for the shipping industry. Because some of my hon. Friends wish to deal with the matter later I will say no more about it now except that before we divide—unless, of course, there is a concession—we shall want a full account of the effect that this latest move will have on the shipping industry.
5.0 p.m.
The fourth Amendment in the group concerns Scotland. Here, again, there are other hon. Members with special knowledge of the circumstances of Scotland who will no doubt wish to deploy the case for that Amendment.
None of these Amendments would have been necessary if the Chancellor had not determined to push ahead with the Corporation Tax in this form before his inquiries were complete. I do not say that these Amendments are necessarily the answer to the problems which he has created, but unless he intends to do some-

thing to mitigate the effects of the tax in its present form, we shall be forced to divide the Committee.
These Amendments are intended as a contribution to the competitiveness of British industry and are, therefore, of great importance to our export performance. Today's announcement of the trade figures for May is disturbing and came as a shock to those who listened to the Chancellor's recent optimistic pronouncements. The effect of introducing a Corporation Tax at a rate of 40 per cent. will be to reduce the cash benefit flowing from the investment allowance by nearly 30 per cent.
These Amendments would restore that benefit and there is no more compelling reason for accepting it than the ominous language of the Board of Trade at noon today when it declared:
The rapid growth in exports which began in the concluding months of last year has flattened out in recent months.
One organisation after another has urged the Chancellor to maintain the value of the allowances, but he has ignored the lot. If he had deliberately set out to use the Budget to discourage modernisation and technical advance or to impede our ability to compete in the export markets, he could hardly have made a better job of it.

Dr. Reginald Bennett: On a point of order. As these Amendments seem to be of the utmost importance to many parts of the country and to many industries, are we to have the privilege of having the Chancellor of the Exchequer with us?

The Temporary Chairman (Mr. H. Hynd): That is not a point of order.

Dame Irene Ward: On a point of order. As with this Amendment we are discussing an Amendment specifically dealing with the issue of investment allowances in Scotland, but not also discussing two new Clauses, one dealing specifically with the North-East Coast and the other with Wales and relating to the same situation, why should Scotland have preference over the North-East Coast and Wales?

The Temporary Chairman: We cannot discuss the Chairman's grouping of Amendments.

Dr. Bennett: On a point of order. Are the Amendments dealing with shipping to be discussed by any Minister from the Board of Trade?

The Temporary Chairman: That is not a point of order.

Mr. Robert Sheldon: The right hon. Member for Altrincham and Sale (Mr. Barber) adduced a number of reasons for thinking that investment allowances should be increased. Some of those reasons were rather curious. He mentioned the grievous blow, as he called it, to the shipping industry and in another context the extent of the increase in the tax burden.
While being of importance in themselves, this is not the point of having investment allowances. The Royal Commission on the Taxation of Profits and Income got at the kernel of this matter in its Majority Report, and study of this paragraph might well be worth while. Speaking of the investment allowance that Report said:
… for an instrument of taxation the whole justification … lies in its service to the economic welfare of the State.
The economic welfare of the State means the country as a whole and not this or that industry. The Majority Report also said that the investment allowances appeared to be conspicuously imprecise, and I do not think that any one could quarrel with that view.

Mr. Barber: Will the hon. Gentleman say whether that Report came before the present Chancellor of the Exchequer promised to increase investment allowances in the development districts?

Mr. Sheldon: The whole point about investment allowances—and this must be clearly understood—is that they are blanket allowances. We have been bequeathed nothing more precise than this blanket encouragement, and clearly what we need is a more precise instrument. The Corporation Tax gives this same general encouragement for investment—although it might reduce the effective rate of allowance—by increasing the advantages of retention, and that retention must be invested somewhere. Thus, the tax gives the same sort of overall encouragement to investment which the imprecise investment allowances, capital allowances and initial allowances provided heretofore.

Mr. Terence L. Higgins: The hon. Gentleman is speaking of blanket allowances. Would he not agree that the allowances specifically made for the development districts, far from being blanket, were specific to the development districts and that in the same way the allowance to the shipping industry was not a blanket allowance, but was an allowance for a particular industry which, on the ground he has advocated, it was felt should be supported for the good of the country as a whole?

Mr. Sheldon: I confidently expect that when the Corporation Tax has been working for a short time a large part of the increase in retention will be used for these investments. This is the argument for reducing the effective scale of extra investment allowances—that we have been thinking too long in terms of blanket allowances which we have in far too great a profusion. We have had them for too long—investment allowances, initial allowances and annual allowances. The right hon. Member for Altrincham and Sale complained about the variation in the rate of these allowances and said that firms could not plan properly. If there were this variation in allowances, one would expect that as the allowances increased, there would be more investment and that as they reduced, there would be less investment. There was not even that measure of control with the blanket allowances and the argument for an increase in general allowances has long vanished from the industrial scene. We have seen too much of them. What we want is a rather more precise instrument for obtaining advantages for the national welfare and the national economy.

Sir Douglas Glover: Does not the Corporation Tax itself lead to blanket retention and so have exactly the same arguments against it?

Mr. Sheldon: That is the whole point of what I am getting at. We have the blanket encouragement to investment by means of the Corporation Tax and therefore there is no need to add to the blanket encouragement. We are replacing part of one form of indiscriminate encouragement to invest by another form, and we do not need further general encouragement but a rather more precise instrument for directing the kind of


investment we need. We can all think of a few examples such as gaming machines and computers getting exactly the same investment allowances. We have had enough of blanket encouragements of this sort. They are maintained by the Corporation Tax and there are arguments for their retention. These arguments are apart from the rather more precise means which it should be our aim to try to achieve.
We must understand here that there is very much confusion as to what is meant by investment and this confusion is almost entirely limited to Members of the party opposite. Every time the word investment is mentioned in this Committee people think of stocks and shares. I am referring to real investment in machinery and plant, real productive investment. There are two kinds of this real productive investment. There is replacement investment which may or may not be modernising, which may or may not add to the created wealth of the country, which may or may not be in the sort of machinery and plant which will produce skilled knowledge and understanding of new technological processes. Then there is the other kind of investment, the one I particularly wanted to encourage, which is investment aimed at modernising industry, aimed at producing new ideas in industry, new processes, new skills, new understandings and new industries themselves which in their turn can spawn and generate new ideas, skills and productive processes to the benefit of all.
When the machine shop manager, to give one example, buys a machine tool he may replace an old machine tool with something which is almost exactly the same but just a little more shiny and a little newer looking but which really incorporates very little new in the way of modern development and new ideas. If that manager of the machine shop buys a machine tool which has some of the latest methods of machining incorporated in it, then not only is he doing a service to himself, but in most cases he is also doing a service to those people who use that machine because he will be generating new skills and understanding. Those new skills will in their turn be of benefit to the country.
The Corporation Tax itself removes the necessity for indiscriminate encouragement for new investment. There is an argument for blanket encouragement of investment. However accurate one may make one's means of discriminating between categories of investment one can never make them perfect. Most people will agree that, however one discriminates, one still needs a high level of replacement. This is not sufficient. If one accepts that the justification of these allowances is the economic welfare of the whole community then one must also accept that these allowances have not been sufficiently successful. They have not led to sufficient new investment, they have not led to sufficient replacement and they have not led to sufficient modernisation.
On page 130 of the Report of the Royal Commission on the Taxation of Profits and Income, there is the interesting comment that
On the whole we think that there is a better method of obtaining more sensitive discrimination than is provided for by the present form of the investment allowance. That would be to sub-divide the present very broad categories of favoured investment and to introduce a range of different rates within these sub-divisions.
That, I think, was one of the best statements in the Report. No doubt successive Chancellors will baulk at such discrimination and categorisation. There are always many problems involved in this. As soon as categorisation is introduced anomalies arise as this Committee well knows. This is an argument for sloth and for doing nothing. The whole of the Purchase Tax and the import duties are based on categorisation, and naturally we must accept those consequential anomalies. There have been many figures in this Committee who have enjoyed themselves from time to time pursuing these anomalies. This is a rather cheap form of entertainment. The whole point is that if one is trying to seek precision in any field at all and categories are introduced then there are bound to be anomalies. This should not deter us from their introduction.

5.15 p.m.

Mr. Gower: Is not the hon. Gentleman in fact saying that a company in the future, even in a development district under somewhat different competitive circumstances, is to use its own resources


without any allowance? That is what he has asked.

Mr. Sheldon: The Corporation Tax, as I said, will be giving that blanket encouragement to invest and the capital allowances including initial allowances and the annual allowance will, I assume, also be giving the same blanket encouragement. My argument is about the investment allowances alone. I am not saying there will be no possibility for any company to do other than obey the categories introduced by the Chancellor. What they will be getting is an additional incentive because of certain advantages to be obtained both by the manufacturer of the new equipment and the people who introduced them. But I feel that, in general, there are natural limits as to how far taxation can serve this purpose. I should far prefer to see investment grants with their more direct and more immediate action and their ability to anticipate the situation rather than the later effect that investment allowances have.
I should be out of order if I were to pursue that very much further. The only thing I would say is that everything I have said on investment allowances applies with even greater force to investment grants. It may well be that by encouraging investment in modernisation the arguments might be that we are directing firms rather too narrowly, but we must remember that what we are giving them is this extra 10 or 20 per cent. which will be sufficient in the marginal cases to encourage but not necessarily deter. I think that the nub of this question lies on the actual categories to be introduced. No one could think of introducing this range of categories, naturally a small one, with anything but qualms, faced with the obvious discrepancies and anomalies that will naturally be part of them. But we have gone so far with these blanket allowances that it is up to those people who do not accept this view to point out an even better solution rather than to deny the validity of this one. If we are to produce discrimination which will encourage machine tools and possibly discourage gaming machines, to advance the rôle of computers by financial means and perhaps place somewhat less encouragement on those less worth-while machine tools which are for replacement purposes only and which could well have been

designed 50 years ago, then this encouragement could be worth while, fruitful and eventually profitable to the whole of British industry which is the only virtue of the investment allowances.

Mr. Simon Wingfield Digby: On a point of order. Might I inquire whether, at a later stage, it will be in order to move new Clause No. 32, which is being discussed with this Amendment, in case we wish to divide upon it?

The Temporary Chairman: It has not been selected for a Division.

Mr. Digby: I am sorry to hear that. I hope that before we reach it the Government will have altered their attitude towards the shipping industry. The hon. Member for Ashton-under-Lyne (Mr. Sheldon) referred to paragraph 426 of the Radcliffe Committee Report. That refers to the advisability, recommended by the first Tucker Committee, of having variable rates of investment allowances.
I wish to refer to the shipping industry, which is I believe a very special case. I am sure that the hon. Member for Ashton-under-Lyne would not dispute that ships have to be replaced after about 25 years. Nor could he possibly dispute that they are becoming increasingly expensive to replace owing to high building costs. It is at this stage of the Bill that we come to the main case for the shipping industry. I believe that it is true to say that of all industries none is harder hit by the Corporation Tax because of the devaluation of the investment allowances partly because of overseas earnings and partly because of the cycles of the industry. It is a fact that in this industry there are cycles of prosperity and periods like the present period of very low profitability. I am sure that the Government would not dispute that this industry has special problems.

Mr. Edward Heath: Would not my hon. Friend wish that the Minister at the Board of Trade responsible for shipping were here? Could not the Chief Secretary do something about the empty Treasury Bench? We have nobody present from Scotland, nobody from the Department of Economic Affairs and nobody to represent the shipping industry.

Mr. Digby: I am very surprised that none of them is here. I should have expected the Chancellor of the Exchequer,


whom I had always regarded as somebody who took some interest in the shipping industry, to be present to answer this very serious case.

Mr. Eric Lubbock: Is it too much to hope that the Ministers are drafting another 40 Amendments?

Mr. Digby: I hope that they are. I cannot help thinking that that may be the case because I cannot believe that even the present Government would wish to damage the shipping industry, especially at a time like the present, when we have balance of payments problems.

Dr. Bennett: It may not surprise my hon. Friend that the Minister in charge of shipping is not here when I point out that throughout the debates on the Anchors and Chain Cables Bill he was absent abroad or elsewhere.

Mr. Digby: I was not aware of that, but I hope that these remarks will be conveyed to the appropriate Ministers so that they will seriously consider this problem.
I need not remind the Committee of the importance of the shipping industry. It is a remarkable fact that we still have no fewer than 20 million tons of merchant shipping—a very fine fleet indeed. But this is not something which can be taken for granted indefinitely if the taxation position is unfavourable. The invisible earnings are of great importance. It has been estimated that if we had to carry all our exports and imports in foreign ships the cost would be about £200 million a year over and above what we pay. There is no doubt about the value to an island nation of an industry like the shipping industry. This has been clearly recognised by Parliament on a number of occasions.
The special position of the shipping industry was recognised in 1951 when, under the Labour Government's Budget, there was a suspension on initial allowances and special provisions were made for shipping. In 1954 and 1956 the special position of the industry was again recognised. In 1957 the investment allowances for ships were doubled. Therefore, I cannot believe that the Government have decided suddenly that shipping is no longer of importance. If that is so, surely they are prepared to do something

to met the additional difficulties which they are making for shipping on account of this tax, which is of their own creation.
The history of the investment allowances is of considerable length. It goes back to 1878. It has been a history of progressively increasing this type of allowance. There were sympathetic references to the special problems of replacing ships in the main Report and in the minority Report, which was signed by Dr. Kaldor, of the Radcliffe Commission. It therefore cannot be seriously disputed that shipping is in a very special position. But it will be hard hit by the Corporation Tax largely because of the low profitability of the industry.
It has been calculated that a Corporation Tax at 40 per cent. would enable a trading company to retain profits as before and to pay the same dividends as before if existing dividends were twice covered by profits. That is not the position in the shipping industry. The cover in the shipping industry is of the order of one. The table of the profitability of various British industries as set out in the Economist's quarterly returns shows that the profitability of the shipping industry is only 2 per cent. compared with that of oil of 12·9 per cent. and of tobacco of no less than 19 per cent. We are therefore dealing with a low profitability industry and yet one which is essential for the future of an island and trading nation like ours.
It might be argued that this was, perhaps, in some way the fault of the shipping industry, but I do not believe that to be the case. The industry is faced with cargo preferences against it which are increasing as the new nations try to build up their merchant fleets. It is engaged in competition which is tax free and tax assisted and subsidised. Therefore, it is not in a fair position to compete with many of its competitors, and the loss of the investment allowances is likely to be rather serious for it and more serious than for many other industries.
In one sample of 40 shipping companies taken in the year 1963, they paid £1·2 million in Income Tax and £500,000 in Profits Tax. Under the new system, the figures will be £4·2 million and £1 million. In the case of one large shipping group, the 1963–64 retentions were £2·8 million, and it is estimated that, with


Corporation Tax at the lower rate of 35 per cent., the relief will be reduced by £2 million to only £800,000. It will, therefore, be seen at once that very much more money will be paid out by British shipping companies which can ill afford it. They can ill afford to reduce their dividends, because that would make it more difficult for them to attract capital, and with an asset like a ship, which must be replaced every 25 years at least, it is essential to build up reserves to meet the very high cost of new ships. I am very glad to see that the Secretary of State for Scotland has come into the Chamber, even though the Minister responsible for shipping has not.
Another point to which I hope the Chief Secretary will pay attention is that a number of orders for ships have already been placed in anticipation of the existing investment allowances which will no longer be forthcoming. It will be seen at once that the industry will be in considerable difficulties.

Mr. Joel Barnett: Is there any particular reason why the hon. Gentleman is referring only to investment allowances and not to capital allowances generally?

Mr. Digby: No. I was using it as a general term.

Mr. Barnett: The reference in all the Amendments and proposed new Clauses is to investment allowances. Is the hon. Gentleman saying that the Amendments and new Clauses are incorrectly phrased?

5.30 p.m.

Mr. Digby: I am saying nothing of the kind. The Committee understands perfectly well what I am getting at.
The proposed increase of 40 per cent. in the capital allowances under the Amendment and under my new Clause would be of great assistance to the industry. If the Government can think of a better way of helping it, that would be splendid. In a cyclical industry like shipping, there are years of high profitability. That is the time when the money has to be saved for the new ships. It is followed, unhappily, by periods when freight rates, which are a world factor, are lower, as at present, and when the industry is subjected to great competition, however unfair, when profits are bound to be

lower. Provision has still to be made, however, for the replacement of the existing fleet.
I hope that the Treasury will reconsider this matter. On an earlier Amendment about shipping, we had the astonishing spectacle of the Treasury refusing additional powers which we sought to give because we thought that they would help the shipping industry. I hope that on this general question of the adverse effect of the Corporation Tax upon shipping, the Government will think again and that, if they cannot accept my new Clause, they will think of another way in which these problems can be met for the shipping industry. If they are not met, the industry will be placed at a still further disadvantage as against its overseas competitors.

Dr. Jeremy Bray: I certainly do not claim to understand the full intricacies of the impact of the Corporation Tax upon investment allowances, but I take comfort in the fact that the Amendment clearly indicates that the Opposition have not understood the impact either. The Opposition Amendment seeks simply to restore the cash value of investment allowances to what it was under the old Income Tax provisions, but it takes no account of the changed incidence on taxation of profits arising from the investment.
The right hon. Member for Altrincham and Sale (Mr. Barber) quoted from the F.B.I. letter to my right hon. Friend the Chancellor of the Exchequer and the Press statement, of which I also have a copy. I note that it does not deal either with the total tax position regarding investment allowances, which is the only rational way to see the effect of those allowances.
I can only assume that there was no intention on the part of the distinguished delegation from the F.B.I. which waited upon my right hon. Friend the Chancellor of the Exchequer to mislead the country and to mislead the members of the F.B.I. about the effect of the Corporation Tax and investment allowances, but that is what the delegation has done. When it spoke then of launching upon an education campaign to make good the generally admitted deficiencies in public understanding of the effect of investment


allowances, one thinks that there is nothing like beginning at home.
The only rational way in which to regard the effect of investment allowances is to look at the total cash flow out and in during the whole life of an investment and to discount the future flows back to the present by a rate of interest which reduces the total incomings to the total outgoings. The discounted cash flow method is advocated by the N.E.D.C. Report on Investment Appraisal. It has been developed by many workers, described by Merrett and Sykes and applied in a distinguished firm in the textile industry by Alfred and Evans.
It is a little surprising that none of the Amendments on the part of the Opposition reflects any appreciation of this modern outlook on investment which is used despite the evidence by firms which cover about 50 per cent. of the country's investment. Those firms are the larger firms. In number they are a small part of the total, but they are nevertheless, important and one would have expected the Opposition to phrase its discussion in terms of their investment appraisal.
As to the straight arithmetic of the problem, I will refer to an example quoted by Alfred and Evans in a paper in the Investment Analyst of December, 1964, which hon. Members opposite would be well advised to read and then to tear up their speeches.

Dame Irene Ward: Before the hon. Member turns to this new point, is he saying that the speech made by the Chairman of Swan Hunter did not reflect the true position and that the speech from Swan Hunter, which is one of our most important shipbuilding firms, was not correct? If the hon. Member does not think that what was said in that speech was true, is it not rather strange that Sir John Hunter should be one of the main people dealing with the incomes policy?

Dr. Bray: I would not presume to judge upon the text of a speech which I have not seen.

Dame Irene Ward: The hon. Member should have seen it.

Dr. Bray: The text which I have is the text of the F.B.I. Press release, which,

to say the least, is a very partial statement of the true state of affairs.
The example which I should like to give relates to a typical investment project giving a return over a 15-year life of the investment, producing the net after-tax average return in this country of 7 per cent.
It brings out the fact, which is not generally appreciated even yet over the bulk of industry, that to secure a net return after tax of 7 per cent., it is necessary only to secure a before-tax discounted cash flow return of 4½ per cent. because of the net favourable impact of taxation on the return on an investment. When industry talks in terms of 12 or 15 per cent. as the required return from an investment, we see at once one of the most important reasons for the deficiency of investment.

Mr. Geoffrey Lloyd: I have before me the N.E.D.C. investment appraisal dealing with this question of the cash flow. The hon. Member has just said that it is because of the effect of taxation that the return is 7 per cent. and needs to be only 4½ per cent. before tax. The sentence which I see in the appraisal, however, states:
Because of this and because the tax allowances accrue early in the life of the asset, the after-tax rate of return will be much greater than the before-tax return, 7 per cent. as against 4½ per cent.
It appears, therefore, to depend upon the existence of the tax allowances.

Dr. Bray: Yes, indeed. I will develop the point. If the right hon. Gentleman refers to Table 2, he will see that it is actually 4·3 per cent.

Mr. Lloyd: It is the substantive point.

Dr. Bray: Taking the fact that to secure a return of £100 on a £100 investment at a 7 per cent. discount cash flow rate one needs to secure in net profit after tax only £44 and one is given the remaining £56 on a plate in tax reliefs, the effect of the change to Corporation Tax is certainly to reduce the benefit of the tax reliefs. It reduces it from £56 to £37, which is a substantial reduction, I agree. The Opposition, however, deliberately ignore the countervailing reduction in tax liability on the gross profits.
The gross profits, which under the old system yielded a net profit of £44, will


yield under the new system a net profit of £60. Thus the total return on this typical project under the new rules, as against £100 under the old provisions, will be £96·8. Thus, there is a shortfall of only 3·2 per cent. as a result of the change in investment allowances. To counteract this reduction of 3·2 per cent., hon. Gentlemen opposite propose to increase the benefit of the investment allowance by 40 per cent. In fact the required increase in the effective rate of return from an investment allowance is not 40 per cent. as the Amendment suggests, but only 8 per cent. Hon. Gentlemen opposite are thus just covering their risks five times over, which seems a little over generous.
In their other Amendment, where they deal with development districts, if hon. Gentlemen do a similar calculation they will find that the required increase in investment allowance return there is not the 40 per cent. which they have set down, but only 20 per cent.

Mr. Lubbock: In fact if the expenditure on which the investment allowance is calculated is increased by 40 per cent. and the investment allowance in this case happens to be 20 per cent., one arrives a t the 8 per cent. figure about which the hon. Gentleman is talking.

Dr. Bray: The mechanism which the Amendment proposes is to increase the expenditure on which the tax is granted by 40 per cent. which increases the benefit of the whole exercise by 40 per cent. I say that the increase in benefit required in this sense is only 8 per cent., and I shall be happy to show the hon. Gentleman the details of this later.
The Opposition seem to be confused in what they are trying to achieve. Are they trying to achieve an equivalent profitability on the investment decision as it is made by a company, or are they trying to achieve a position equivalent to that which existed before in the profitability to shareholders of a decision to invest made by a company? These are two different concepts, and hon. Gentlemen opposite seem to have tried to patch an old garment with new cloth.
If their objective is to achieve the same rate of return to shareholders as a result of the investment allowance under Corporation Tax, this will require a larger increase than 40 per cent. Indeed,

so much would the increase in investment allowance have to be, that one would also have to modify the initial and annual allowances.
Clearly, tremendous assumptions have been ignored by the Opposition. I appreciate that the right hon. Member for Altrincham and Sale said that it was only a bosh shot, but these tremendous assumptions require some sense of where the economy is going, not just next year, but in the years ahead as Corporation Tax begins to show its influence on the economy as a whole.
Even taking these provisions relating to investment allowances, which the Chancellor has said are not the last word, the tax treatments of buildings and of working capital are now more favourable than they were under the old system. It is simply because the investment allowance on plant and machinery is 30 per cent., whereas on buildings it is only 10 per cent.—

Mr. Lubbock: It is 15 per cent.

Dr. Bray: I shall not contest that now. The difference means that buildings are more favourably treated under the present provisions than under the old ones.

Sir D. Glover: I wish that the hon. Gentleman would not drop his voice at the end of each sentence. I am finding it extremely difficult to hear what he is trying to say.

Dr. Bray: I apologise for having a cold which makes it difficult to make myself audible.
I have accepted from the typical example that I have given that there is a very small net reduction in the incentive to invest in plant and machinery. If we have less tax relief on investment, and the same total revenue has to be raised in Corporation Tax and Income Tax combined, one is bound to ask where the extra money is going. Who is getting an extra incentive for what? I have put this question to investment experts and analysts, and they have not been able to give a straight answer. In many cases the question has not occurred to them. I therefore think that it is a little over hasty for the F.B.I. to suppose that it has the complete answer to this question.
It seems that in the transitional period at any rate the effect of the change will mean that there will be smaller taxation of accumulation to reserves. In the long-term equilibrium I think that the question is wholly academic, because the shape of the economy, the distribution of income, the rate of investment, and the rate of growth will all have changed. But there will be in the transition an increase in the rate of accumulation of reserves, due not to a lower investment rate, but simply to a marginally lower rate of tax incentives to investors. I accept that this is a complicated question, perhaps not suitable for discussion on the floor of the House, but if we cannot get these matters straight, one wonders who can.

5.45 p.m.

Mr. Heath: I have been trying to follow the hon. Gentleman's argument with interest. He is being rude to Members of the Opposition for not putting down an Amendment in terms of discounted cash flow. He might as well be critical of his right hon. Friend the Chancellor for not expounding his proposal in these terms. The fact is that this is not a direct policy. It is an indirect consequence of adopting Corporation Tax. That is our main objection.
My objection to the hon. Gentleman's argument is that he is accusing us of overlooking certain assumptions. He is assuming that a company's expenditure is going to be entirely unaffected by its dividend and degree of cover. These are fundamental. They undermine all the figures which he has given, except on one basic assumption which is a rate of 35 per cent. with a company with a cover of about two.

Dr. Bray: The only assumption to be made relating to the profitability of the company is that it is able to take full advantage of the investment allowances. This is considered to be simply an investment project in isolation, as, for example, Courtaulds deciding whether to build an extension in Coventry. It is unrelated to the question of the dividend cover, the general profitability of the company, or anything else.

Mr. Heath: What the hon. Gentleman is saying is that, whatever they may lose

on the investment allowances, they are going to be able to replace because of the additional amount of profits which they will retain. This is making an assumption as to what they have to pay in taxation and existing dividends with the present basis of cover. The assumption is that if it is necessary to use the rest for investment the dividend suffers. I do not believe that one is entitled to make that assumption on looking at the conduct of its investment by a normal company.

Dr. Bray: I think that the actual situation in firms, which is what the House must finally consider, is that a decision is made on the profitability, on the return within the company, and afterwards one looks at how much one can afford to distribute. Quite clearly there are two distinct processes here, and I am sure that the right hon. Gentleman will find that firms accept that there is a rôle for the Chancellor, that there is a rôle for a national policy in setting the general level of distribution relating to rate of growth and so on, and that there is also a rôle for the company in assessing the profitability of the individual projects which it has to handle.

Mr. Heath: If the hon. Gentleman was starting from scratch and establishing a new capitalist system in which people had to make decisions for the first time, his argument would at least be debatable, but when he is starting from the existing position on the existing capital structure, on the existing dividend payouts, it is not justifiable in considering industrial decisions.

Dr. Bray: That is widening the point beyond that of the effect of investment allowance. If he wishes to make generalisations about Corporation Tax as a whole the right hon. Gentleman can do it at another stage of the debate.
I want to refer to the question of the way in which decisions are made in firms. At present there is a tremendously strong inducement to invest, as an effect of the investment allowances. But many firms do not understand how this works. The National Institute Survey, first of all, and then the N.E.D.C. report of the Management Consultants' Association have been the only reports, as far as I know, which have gone back to the actual prime evidence. The accountants' report, and


certainly the F.B.I. report, are not drawing upon anything other than expressions of opinion and general suppositions on the part of their members. If what I have just said is not the case, hon. Members will be able to correct me later.
It is not good enough for the F.B.I. to say that this evidence is unreliable. It must bring evidence which points in another direction. My experience is that in the chemical industry three years ago sums of up to £100,000 were invested without any consideration of the tax position. I have checked this with another chemical company in the last few weeks and find that, within the discretion of the works manager's sanction—which often goes up to £50,000—there is no consideration of the tax position. These are firms which in reply to the National Institute, or the Management Consultants' Association, will have said that they do take account of the tax position in their investment decisions.
Another firm in my constituency was anxious to secure a development district grant for a new crane. On technical grounds it was not eligible for that grant, but I drew attention to the fact that the free depreciation provisions were three times as valuable as a direct grant. However, the firm simply pointed out that it had no profits against which to set off its Income Tax liability.

Mr. Geoffrey Lloyd: The hon. Member has referred to what happens in the case of chemical companies. I know the one that he was connected with. He has said that amounts under £100,000 were being dealt with without considering the discounted cash flow, say, three years ago. Is he suggesting that the mass of investment by these big chemical companies is now done without consideration of discounted cash flow, so that there is a certain proportion of their investment in which this technique is not used—the "minor works", so to speak. Is that his argument?

Dr. Bray: No. I was accepting that probably 50 per cent. of investment of the country as a whole is based upon fairly rational investment criteria, but that even in those firms which appear to use proper criteria there are some pretty big loopholes. Furthermore, as far as I know the only handbook of use to industry in this matter was published in

March of this year, and is only now coming into general use.

Mr. Heath: The hon. Member is confusing the issue in his last remarks. He was talking about free depreciation. I would be the first to agree that industry has not yet understood the value of free depreciation in development districts, but that has been in force for only two years, whereas investment allowances, which have been in force for 12 years, are understood.

Dr. Bray: That is not what is shown by the surveys, and what one finds when asking for evidence with which the right hon. Gentleman could support his argument. The Management Consultants' Association goes to the nub of the problem when it says that
The intended inducement"—
that is, the investment allowance—
does not obey a fundamental rule of an incentive. This is that to be effective the payoff must follow as closely as possible the action which it is intended to stimulate.
This seems to me to be an absolutely fundamental proposition, which there is no way round.
That is the human argument, recognising the imperfection of the ways in which decisions will always be taken in industry, but it is also backed up with the arbitrariness in providing an inducement to investment only for those companies who have a tax liability against which they can offset their investment allowances. I am sure that my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) is right in saying that the direction in which we should move is towards the repayment of a proportion of the purchase price of investment goods at the time of sale.
The example of computers is always mentioned in this connection. I have talked to a number of computer salesmen on this point. First, none of them has heard of investment allowances. [HON. MEMBERS: "Oh."] They are selling lots of computers. Secondly, they acknowledge that if we were able to offer a 30 per cent. subsidy at the point of sale it would be tremendously effective. This is what we are now able to offer, if this is the basis of the incentive to invest which we choose to adopt.
When I speak to people in industry about this, the fear expressed is that to offer this kind of rate of subsidy in the form of a stimulous and incentive to investment would produce a quite unmanageable investment boom. That is probably the case. In the transitional period we should be paying out the 30 per cent. subsidy in the same year that we were remitting the tax relief on the investment allowances in respect of an earlier year, so that there would be a great deficiency in the Exchequer revenue in that year. This could be got over by gradually introducing the principle of the repayment at time of purchase on one product after another, so as to maintain full employment of the productive capacity in the capital goods industry.
This sounds complicated, but it is not when we realise the type of equipment to which we shall be applying it. It would not be necessary to move over totally from an investment allowance basis to an investment grant basis or repayment at time of purchase basis because the position is already pretty satisfactory with buildings and is favourable in respect of working capital. On plant and machinery, however, it is undoubtedly necessary to do something.
The question is: how selective is it desirable to be? Here we move over into considering the instruments of economic planning, and we cannot but be impressed by the control which the French Commissariat au Plan has over investment in France, where it is able to act as adviser to the Crédit National, which is the bank which finances most of the expansion in French industry. The planners are able to say yea or nay to particular investments in particular firms over the greater part of French industry. We have a more efficient capital market in this country, and that is not the way in which we would wish to proceed.
In the investment grant we have a splendid incentive. We must be able to direct our efforts to that part of industry where there is the greatest need for the expansion of investment. It would have to be done gradually. At present we have a 30 per cent. investment allowance which, under the old tax provisions, carried relief at the 56¼ per cent. tax rate.
If we reckon that tax relief could not be given on the total purchase price, but only on the balance of the purchase price left after the investment grant, a 30 per cent. investment subsidy is wholly practicable. I hope that even if this is not the direction in which the Government are going to move hon. Members opposite will have had rubbed into them the fact that a tremendous stimulus to investment is possible one way or another with the aid of the tax machinery which we have now developed.

6.0 p.m.

Mr. Michael Noble: I hope that the Committee, and particularly my hon. Friend the Member for Tynemouth (Dame Irene Ward), will forgive me if I speak for a few moments to Amendment No. 534, in page 63, line 25, at the end to insert:
Provided always that the expenditure in Scotland in respect of which investment allowances are calculated shall for the purpose of corporation tax be deemed to be increased by 40 per cent.
The Amendment seeks to achieve the same effects as were mentioned by my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) specifically for Scotland. In saying this, I should like to make it clear to the Committee that this is not a dog-in-the-manger attempt on the part of Scotland to get something which, perhaps, the rest of the country ought to have.
The position as I and many of my hon. Friends see it is that the Chancellor may, for some reason best known to himself—and probably kept to himself—feel capable of making only a very small gesture. If that is so, we would maintain that the place where that gesture should be made is Scotland. We realise very fully that the case for these extra allowances is very great, perhaps in the country as a whole, certainly in the development districts, but if all else fails, the Chancellor should remember that there is a place called Scotland—

Dame Irene Ward: What a hope.

Mr. Noble: My hon. Friend the Member for Tynemouth is perhaps not so great an optimist as I like to pretend to be, at least at the beginning of my speech.

ROYAL ASSENT

6.2 p.m.

Whereupon The GENTLEMAN-USHER OF THE BLACK ROD being come with a Message, The CHAIRMAN left the Chair.

Mr. SPEAKER resumed the Chair.

Message to attend the Lords Commissioners:

The House went:—and, having returned;

Mr. SPEAKER reported the Royal Assent to:

Law Commissions Act, 1965.

FINANCE (No. 2) BILL

Again considered in Committee.

[Mr. H. HYND in the Chair]

Question again proposed, That the proposed words be there inserted.

6.12 p.m.

Mr. Noble: My right hon. Friend the Member for Altrincham and Sale (Mr. Barber) pointed out that it was common knowledge, and only too often visible, that the Chancellor of the Exchequer was at loggerheads with the First Secretary. He might have added that the First Secretary was at loggerheads with the Minister of Technology, but that is neither here nor there.
We who come from north of the Border have been complaining that the Secretary of State for Scotland is not much more often visibly at loggerheads with the Chancellor of the Exchequer. What we have seen and what the Committee have heard time and again, almost ad nauseam, in the past five to 10 years has been the Secretary of State and the Minister of State—who were in their places a while ago but, like the other hon. Gentlemen opposite who represent Scottish constituencies, have now left the Chamber—

Hon. Members: Where are they?

Mr. Noble: I shudder to think. They are probably afraid that if they hear some words of wisdom about Scotland they might find themselves in the wrong Lobby and in trouble with the Patronage Secretary.
As my right hon. Friend said, all the words which have been poured out in Parliament—many of them by the Chancellor himself—by hon. Gentlemen opposite who represent Scottish constituencies have always been to the effect that specific things must be done for Scotland. However, after eight or nine months in office, not one action has come from the Secretary of State or the Government that is specifically designed to help the position in Scotland. No wonder the Press in Scotland refer to the right hon. Gentleman as "Silent Willy". He at least has had the sense, unlike the First Secretary, not to blame his rapidly increasing unpopularity on the Press.
The position in Scotland is beginning to look rather serious. The F.B.I., which made a report on a survey on all industry in Scotland, stated that there was beginning to be a slowing down in the considerable improvement which had been taking place in Scotland in recent years. Mr. George Middleton who, like the First Secretary, is never very slow in making his voice heard and whose face is very well known throughout Scotland, assured the Scots a day or two ago that they need not worry. Things were not really too bad, he said. That is the sort of remark, coming from somebody like Mr. George Middleton, which gives the whole show away.
It is perfectly true that things are not too bad. It is also perfectly true that by last October Scotland was beginning to make its first really serious industrial break-through for 15 or 20 years, perhaps longer. It was largely due to the actions of my right hon. Friend the Member for Bexley (Mr. Heath) and my right hon. Friend the Member for Barnet (Mr. Maudling), when they were at the Board of Trade and the Treasury, in trying to create conditions in Scotland where business could flourish and go ahead faster than in other parts of the country,

Mr. David Steel: While I do not disagree with the general tenor of the right hon. Gentleman's remarks, would he not agree that the Amendment is the first sign from his party of an attempt at legislation to apply specifically to Scotland something which the Liberal Party has urged for a long time? Would he, therefore, not agree that this welcome sign shows that the


loss of 13 seats in six years has had some good results?

Mr. Noble: The hon. Gentleman has not been in Parliament long enough to recall that as recently as last November a similar project was put forward for Scotland and was not supported or signed by any hon. Members of the Liberal Party.
As I was saying, due to the actions of the former Chancellor of the Exchequer and the former President of the Board of Trade the really first serious and continued industrial upsurge in Scotland was visible. Hon. Gentlemen opposite may say, "We told you that these things should be done. We have been telling you about it for years". If they want to have that satisfaction, let them have it. When they took office the position in Scotland was visibly better than it had been for 20 or 30 years. This was due entirely to the actions of the former Government and last year the area which produced the fastest growth rate in industry was Scotland. It was perhaps the first time that that had happened for a generation.
After all the Government have said, what is our position after their first nine months? We have had what has probably been the fiercest credit squeeze the country has seen, with its very high Bank Rate. We have had a very steep rise in petrol tax. We have had all the symptoms of a very fierce stop-go movement—something which the party opposite promised the electorate above everything else they would avoid. Those who live in the north of Scotland know very well that if a stop-go policy is operated in Whitehall, Scotland inevitably feels the pinch more than does any other part of the kingdom.
I listened with some interest to the hon. Member for Middlesbrough, West (Dr. Bray). I see that he has gone to blow his nose—it was certainly necessary. He apologised for the fact that he could not be heard. It was indeed difficult to follow what he said. The hon. Gentleman—perhaps unintentionally, but certainly effectively—spoilt the whole tenor of his argument by trying to go into too much detail which he did not fully understand. He spoke of the discounted cash level—we all know the scientific approach to these things.
The hon. Gentleman made some very interesting and, I think, typical remarks. He said that if his assumptions were correct—and it is a fairly big "if"—the damage that the Chancellor's action was doing to firms was only—only—of the order of 3½ per cent. He also said that a great many firms did not understand what it was all about—the normal arrogance of the considerable scientist. He told us that 50 per cent. of the investment in the United Kingdom was done on rational grounds—50 per cent.
I do not know whether that is right or wrong, but the point that he missed, and the point the Chancellor himself must have missed, is that if one is to get industry going in the development districts and keep it going there—whether in Wales, the North-East, the North-West or Scotland—the essential first thing is to create confidence.
If 50 per cent. of United Kingdom firms do not make their investment on the most rational grounds—perhaps as well as I.C.I.—and if many firms do not understand its nature, I can only say that throughout our series of debates on the Finance Bill it has been clear that very often members of the Treasury Bench did not understand, either.
The point I want to make as clearly as possible to the right hon. Gentleman the Chief Secretary is that he may be able to argue that the damage is only 3½ per cent., or 5 per cent., or 8 per cent.—I do not really care. If he will talk to people in Scotland and in the development districts he will find that a great many businesses, perhaps not as brilliantly managed as we would like them to be, have lost confidence because of the action that the Chancellor of the Exchequer has taken.
It is certainly true that the free depreciation allowances that my right hon. Friend brought in two years ago took a year or more to be fully understood—and as I think the hon. Member for Middlesbrough, West said, some of them are not fully understood yet. Nevertheless, growing use was being made of them, and firms were expanding and becoming more modern. I do not object if the Chief Secretary feels that this is not the best form of help for Scotland or the development districts. I would not care too much if he adopted the suggestion of his hon. Friend the Member for


Ashton-under-Lyne (Mr. Sheldon) and, instead, gave investment grants. What I feel very strongly about is that throughout the whole of this Bill practically nothing has been done to try to make our industry more competitive and more efficient.
In Scotland, we have a good many types of industry which need to become more modern, more competitive and more efficient, but not only has nothing been done to help them but no specific attempt has been made to ease the very serious problems created in the North-West and in Scotland and many other parts of Britain by the rapid changes in industry which have taken place over the last ten or fifteen years, and for which Chancellors in Finance Bill after Finance Bill have pleaded. I hope that the Chancellor or the Chief Secretary will not only be able to do something to recreate the confidence that existed in Scotland but something positive to help.
My hon. Friend the Member for Dorset, West (Mr. Wingfield Digby) spoke of the shipping industry,—an industry that stretches right across the borders of these areas—the Clyde, the Tyne, Barrow-in-Furness, and so on. If something could be done even there it would be a help, but something more is needed—

Dr. Bray: Before the right hon. Gentleman turns his remarks from the development districts, I am sure that he must have heard his right hon. Friend the Member for Bexley (Mr. Heath) say that the free depreciation provision was not working. Has he therefore no better suggestion to offer from that side of the Committee?

Mr. Noble: If the hon. Member had been in his place earlier he would have heard what, in fact, I said about free depreciation allowance.

Mr. J. Grimond: I intervene briefly in this debate because I believe that we should guard against undoing the good which some policies lately pursued may be doing in some areas by introducing other policies which may be at variance with them. There has been a new determination to help certain areas which suffer from a high rate of unemployment or a high rate of depopulation, and the measures taken are very welcome. It has been argued

that, amongst those measures, depreciation allowances or investment allowances are not the most important, but if that is the case now I think that they may become increasingly important in the future. I believe that industrialists are examining these provisions more closely, and I would be very sorry to see any lessening of investment in the development districts due to this Finance Bill.
It is quite true that there may be better ways of encouraging investment in the development districts—and I am particularly interested in Scotland—than by providing investment allowances. Investment grants may be a superior way of meeting the need. At any rate, we should like to hear whether the Government have any proposals to make good any possible decrease in the value of the investment allowances.
I imagine that the Government will argue that companies can now cut down their distributions and in that way pay less tax. I take it that the Government's argument is, "Naturally, if you decrease the taxation you decrease the value of the allowances." I am assured that this is unrealistic, and the changes are unlikely to work in this way; and that the effect of a Corporation Tax of, say, 37½ per cent. on a £1 million purchase of a ship is to increase the charge for taxation by £85,000, and on plant and machinery by £56,250. The Government may also by discouraging investment directly give the impression to industrialists that the outlook is not as certain as they would like it. There may already be a tendency to hold off investment decisions this autumn and next winter, and this may be a bad moment to do anything to discourage confidence, particularly in the development areas.
I have always argued that the easiest way to help these areas is to give them some tax concession. This can be done in various ways, and I am not particularly tied to this form of tax concession. The fact is that if we want to redistribute our industry and employment, one of the easiest ways to do so is to make some tax differential as between one area and another. That was accepted by the Chancellor of the Exchequer about 18 months ago, and I hope it will continue.
If it is said that this is interfering with the normal flow of investment, I draw the attention of the Government to the fact that in Sweden companies can put on deposit with the central bank reserves on which they pay no taxation but can draw on them for investment purposes. I am not saying that this is the only method or necessarily the most desirable method of encouraging investment, but there is an increasing tendency in the world at large to subsidise investment in one way or another. The Chancellor made this very much the theme of his Budget statement. It has been argued that the taxation charges are for the purpose of encouraging investment. I should have thought there was a danger that the Government were with their left hand undoing policies which they were pursuing with their right hand.
6.30 p.m.
In fact, broadly speaking, we all want to encourage investment. I think it is accepted by everyone that if we are to do so we have to give some incentive by way of grant as is already sometimes done or by capital depreciation. In Scotland, this is important at a time when there are very welcome signs of increased employment there which we want to continue into the coming winter. In spite of what has been said about the rosy position in Scotland, which I am very glad to see, with unemployment figures lower than they have been for some time, we are particularly subject to any general recession in the country. Usually a recession hits us with Northern Ireland and a few other places dependent on heavy industry much worse than the south-east of England which seems to attract light industries and the head offices of so many businesses.
I view the coming autumn and winter with some disquiet. It will be extremely disquieting if we are to be overtaken again by the type of recession from which we have suffered so much in the past and which is often brought about not by overheating in the economy in Scotland but through overheating which takes place in South-East England which the Government then consider they must damp down.

Mr. Higgins: There are some vitally important matters we should

discuss in connection with this Amendment. It has been suggested from the other side of the Committee that the criterion in considering the effect of these Amendments should be the economic welfare of the State. I could not agree more. That is the criterion we should adopt in deciding whether to accept the Amendments, in particular Amendment No. 321, which is concerned with the development district allowances and Amendment No. 322, which is concerned with shipbuilding.
A point which is perfectly clear is that we have been trying in our economy ever since the war to balance on a knife edge between inflation on the one hand and unemployment, on the other. Whenever we have taken deflationary measures we have tended to generate unemployment in the development districts and whenever we have endeavoured to offset this and to balance the economy we have found that before we mopped up the unemployment we were confronted with inflation in other parts of the country. We have been continually balancing on this knife edge and the whole point about the problem is that it is a regional problem. Therefore, anything we can do to balance the regions we should do as strongly and as enthusiastically as we can.
This point was clearly recognised by the previous Government when they brought in regional investment allowances. We should be quite clear that this was not done easily. The principle of non-discrimination in taxation between regions had been very pervasive in previous generations and it was a considerable step forward to take specific action in particular development districts where the level of unemployment tended to become high whenever we attempted to curtail inflation. The previous Government were absolutely right in taking the action they did. It meant that we could blunt the knife edge on which we were poising so precariously and so operate the whole economy on a higher level of employment than otherwise would be possible.
It is most important to encourage investment in the North-East, in the North-West and in Scotland, where traditional industries have tended to decline. Development district investment allowances have been one of the means by which we


have done this. The point should be made that the effect of Corporation Tax must be to reduce the real level of these incentives. Whether taxation in general is going up or down is not relevant in this context. If we look at it from the point of view of the welfare of the economy the question we have to answer is whether investment will be less in development districts as a result of Corporation Tax or not. Unless we accept Amendment No. 321 or something comparable to it we shall find that the incentive to investment in those districts will be lessened. Therefore I hope that the Government will be glad to accept these Amendments because our whole object is to improve the legislation. Clearly it has been drafted in a hurry without regard to many of its effects and, therefore, it is right for the Government to accept this Amendment.
Arguments which have been put forward from the other side of the Committee against these Amendments have relied almost entirely on the view that investment allowances are not very effective anyway because businessmen do not know how to calculate their value. Businessmen tend to use very out-of-date budgeting techniques such as a simple rate of return criterion for a single year before tax, and so forth. Such practices have been rightly deplored by some hon. Members opposite and more strongly from this side of the Committee. But if investment allowances are not used for this reason acceptance of the Amendment would not involve the Government in any extra expenditure. In fact, more and more the value of these allowances are being calculated in the correct manner as businessmen are beginning to use discount cash flow techniques. They are beginning to take into account all investment allowances in the manner in which they should do.
I am very suspicious of the suggestion put forward by one hon. Member opposite that this kind of capital budgeting technique can be employed on a cook book basis. I suggest that we cannot merely produce a pamphlet to tell people how to use better capital budgeting techniques and hope that that will produce right results immediately. Experience has shown that if one tries to use a cook book—I use that term in the sense of a recipe book and

not in any way as a reflection on companies concerned—perfect capital budgeting will not be achieved.
But, as a result of the N.E.D.C. pamphlet and debates in this House businessmen are using techniques which can take into account investment allowances and that is helping to balance the economy in the way in which we wish by encouraging investment in the development districts. That process will be reduced unless Amendment No. 321 is accepted.
In an intervention the hon. Member for Middlesbrough, West (Dr. Bray) suggested that my right hon. Friend the Member for Bexley (Mr. Heath) had said that the free depreciation allowance was not working. That was not what my right hon. Friend said. He said that it was difficult to take account of free depreciation unless one used proper capital budgeting techniques, whereas investment allowances introduced some years earlier are more readily allowed for in the kind of techniques which all businessmen use.
If the Chief Secretary refuses, as I hope he will, to shelter behind the argument that businessmen do not know how to calculate the value of investment allowances he will no doubt accept the Amendment. If he insists on doing so I hope that he will tell us what alternative he can put forward, perhaps in terms of straight subsidies, so that there will continue to be incentives to invest in development districts. It is important that the incentive to invest in development districts should not be lessened in, say, the next nine months. We now have an incomes policy which has been reduced to a farce. Wage claims will, therefore, run headlong into the Government's budgetary policies, which tend to be deflationary. There is a real danger that by October there will be hyper-inflationary pressure in the economy and rising unemployment in development districts. In these circumstances, it would be highly undesirable if any action were taken now which would discourage investment in development districts. For this reason I ask the Chief Secretary, if he does not intend to accept the Amendment, to tell us what positive measures he proposes to take to ensure that investment in development districts is not reduced as a result of the implementation of the Corporation Tax.
Amendment No. 322 is concerned with investment allowances for shipping. It is clear that shipping has been treated as a special case in the past primarily because it makes export earnings. There is no doubt that our shipping industry produces an enormous amount of foreign exchange in spite of the difficult conditions which have persisted in shipping and in spite of the competitive state of the market. The fact of the matter is that since the war our shipping industry, particularly the tramp shipping industry, has been confronted with overseas competitors, some of whom have been adopting what are know as flags of convenience.
This means that they register ships in countries where the tax burden is much less onerous than it is here. Our shipping industry also has had to contend with competition from countries which indulge in flag discrimination, which is the practice of a country to say that some of its trade shall be carried in ships registered in that country. Thirdly, our shipping industry has had to contend with foreign ships which are heavily subsidised, whether it be in terms of building subsidies, which even some years ago were as high as 50 per cent. in the United States, or whether it be in terms of operating differential subsidies, which can also be very large.
The overall effect has been that our shipping industry has been under great pressure and has been subjected to competition, which has not been fair in the normal sense of the word. Our shipping industry would no doubt be much happier if the Government could negotiate agreements with other countries so that flag discrimination was eliminated or subsidies were limited. Failing this, if our shipping industry is to maintain its share of world trade and fight unfair competition, it deserves to have the investment allowances effectively maintained at their present level.
The Government should accept the Amendments, particularly Nos. 321 and 322, because to balance the economy we need to maintain the value of development district investment allowances and the value of shipping investment allowances to ensure that our export earnings are maintained. These are two areas where the unfortunate effects of the Corporation Tax should be offset.

6.45 p.m.

Mr. Barnett: I am pleased to follow the hon. Member for Worthing (Mr. Higgins) who said much that I can agree with. I wish that more speeches had been made this afternoon along the lines of the speech made by the hon. Gentleman. Unfortunately, the right hon. Member for Altrincham and Sale (Mr. Barber) felt it necessary to deal with the matter purely and simply from the aspect of making as much party political capital out of it as he could. He did not deal specifically with the problem which concerns us, which is whether the effect of the Corporation Tax will be a disincentive and be generally harmful to development districts and industry generally.
The burden of the case is whether an investment allowance as such is an incentive. There are also other factors. For example, additional funds are provided to companies, inasmuch as if additional tax relief of any sort is granted companies, particularly large ones, need put less into tax reserves and can have more available for use, either for investment in plant and machinery or for moving into development districts.
I had hoped that the right hon. Member for Altrincham and Sale would have said more on this aspect of the case. He did not deal with the question whether we should discriminate between one class of investment and another. He merely moved an Amendment which would give an overall increase in tax relief across the board. The Finance Bill has rightly been criticised in other respects—for example, as to the effect on overseas companies and the fact that it will hurt all sorts of companies, whether they are serving the national economy or not. If Amendments such as these were accepted, or if the idea of the investment allowances we have now were accepted, we should get away from the way I would like to see this type of relief work.

Mr. Barber: Since the hon. Gentleman has graciously referred to what I said, I should like to make it clear that I am not a rigid adherent to the present system. What I object to is the Chancellor's saying that he has not made up his mind, that he will study the matter during the coming year, that he is not satisfied about the incentive character of the investment allowance, and then his


taking action, because of the way in which he has introduced the Corporation Tax, which very substantially reduces the cash value of the investment allowances. I will not go into great detail, but I quoted the statement by the Minister of Technology yesterday that the Government recognised the value of the incentive. It would be much better to retain the incentive until the Chancellor has made up his mind. He said that he would make up his mind during the coming year.

Mr. Barnett: I am sure that the right hon. Gentleman would want the Chancellor to have sufficient evidence about the value of the incentive and about how companies make their decisions. It is not for me to defend my right hon. Friend the Chancellor. Indeed, I want to criticise him in certain respects. The right hon. Gentleman said that he moved the Amendment because he wanted to make a contribution to industry, but he said nothing to help industry or show how we could help industry in any other way. In fact, the right hon. Gentleman did not speak closely to the Amendment.
It is not sufficient to say, as the Amendment does, that we should increase by 40 per cent. the amount on which we should give the investment allowances, without referring to capital allowances generally, which on the right hon. Gentleman's argument are also reduced in value. We know that capital allowances generally in one sense are a form of loan to those who obtain the benefit from them. But in the case of the balancing allowances or the actual loss over the period of use of the machine or vehicle, this is also affected by any reduced taxation.
Why, therefore, is the right hon. Member for Altrincham and Sale referring only to investment allowances? If he had followed the argument through he should have moved an Amendment affecting the whole range of capital allowances. But it is true that if one reduces the rate of taxation one thereby reduces the allowance which has been given. This is self-evident, but the cost to the Exchequer at present of investment allowances, annual allowances and capital allowances is reaching such astronomical figures that we as a Committee are entitled to ask whether this is the best method of giving relief.
I am disappointed that only two hon. Members, both on this side of the Committee, in the course of this debate have examined in any way the case for a system other than the whole range of initial allowances, annual allowances and investment allowances. The only research that has been undertaken has shown at least that most companies take no great cognisance of the effect of investment allowances. This has not been a surprise to me because I know from experience that most boards of directors look at their profits before tax.
I ask the Committee to consider whether we can go on increasing investment allowances, annual allowances and initial allowances across the board regardless of whether they are being given for a piece of furniture in a house or for a computer or a machine tool. We should ask ourselves what we should be doing with this great amount of money, which has reached over £300 million in investment allowances and over £700 million for capital allowances generally. These are figures to which any responsible Chancellor of the Exchequer must give consideration. I hope that my right hon. Friend will do so when he has received the results of the research which is now being undertaken.
I listened carefully to the arguments adduced by hon. and right hon. Members opposite for giving assistance to the development areas. We would all want to give them assistance. I am glad to say that my own area of Lancashire is not a development area, but if we are all pleading for different areas I would quickly plead for Lancashire and, in particular, for my own constituency of Heywood and Royton which has certainly suffered enough in the past.

Mr. Gower: Is not the position more serious than that? Is it not a question of giving assistance to development areas but of reducing the assistance which development areas are already enjoying—a much more sinister thing.

Mr. Barnett: I leave the hon. Member to refer to sinister matters and will deal with investment allowances which I was talking about. I do not deny that this must have the effect of reducing relief, but should we now go back and give this type of relief to the development areas?
Before we use this method of giving relief we are entitled to look at it closely and consider whether or not it is within our powers to devise a method of giving rather better relief to the development areas, and particularly to a specific industry which of itself could boost the economy generally and in that sense also assist the development areas.
It is possible that investment grants might be the answer, though I would not go further than to say that they are a possibility. I certainly could not go all the way with my hon. Friend the Member for Middlesbrough, West (Dr. Bray) who spoke about a 30 per cent. investment grant in the first year. His argument was complex and I will not go into it again, but I should not have thought it likely that we would be able to give 30 per cent. investment grants in one year. I should have thought that this was treading on dangerous ground.
We should consider the effect of the annual allowance and investment allowance on boards of directors when they make their decisions about investing. Incidentally, I am glad that at least today we are spared the argument of the terrible effect on small companies. This would have been too much, because very small companies are not affected anyway. They allocate profits by way of directors' salaries and bonuses and they would not be paying Corporation Tax. The next scale of small companies, that is those with profits of from, say, £2,000 to £30,000 have many other considerations in mind when they make their investment decisions.
If we are to give relief from taxation to this extent we are entitled to ask if it is having the maximum effect that we expect, and we are entitled to inquire into the reasoning of boards of directors when they make their decisions. I believe that there are a number of considerations. Firstly, they decide on the amount of funds available at a given time. Another factor, and an important one, is the slothfulness or otherwise of boards of directors. Many have large funds available to invest which they do not invest, or invest very badly. Then foremost in the minds of directors is the forecast trends of their own industry.
Among these criteria there is only one—that relating to the amount of funds available—which is relevant to this method of relief. Even then it is not a direct incentive. It is merely that to a small percentage the directors would have more funds available if we gave them a higher investment allowance and higher capital allowances, in the sense that, taking this year's accounts, instead of allocating to their tax reserve £X they would allocate a small percentage less. Therefore, in this sense there is an incentive, because they have more money available, and directors using this as one of their criteria might be prepared to invest that money.

Mr. Higgins: Would not the hon. Member agree that if we calculated, let us say, the internal rate of return on the present value this would appear more favourable if the kind of Amendment which we propose were accepted?

Mr. Barnett: I would not disagree with the hon. Member. I was merely pointing out in what respect more funds would be available and attempting to show this type of investment or capital allowance would be an incentive in one small sense only, and that the main criterion in judging it must be whether or not it would be an incentive.
I support much of what has been said about the need to give assistance in specific parts of industry and to development areas, but I do not believe that we have examined this matter anything like sufficiently. I hope that the Chancellor, in making his review, will proceed with considerable urgency. I hope that he will not leave the matter, when he comes to a decision, to next year's Budget. I am sure that we can have sufficient sense of urgency to find an answer to the problem long before next April, and I hope that by the autumn of this year it will be possible to decide what should be done. I see no reason why the Chancellor should not then say that he has the answer and knows as a result of his research what industry and the country need and act accordingly without waiting until next year to implement it.

7.0 p.m.

Mr. R. Chichester-Clark: This debate has become temptingly regional. We have heard from Scotland and from the North-East—

Dame Irene Ward: No.

Mr. Chichester-Clark: I have no doubt that we shall hear very loudly from my hon. Friend later—I look forward to what she has to say—but I feel that I should make my voice heard in speaking for Northern Ireland.
On 22nd February last, we discussed economic development and regional planning in Northern Ireland. We discussed Professor Thomas Wilson's Report on Economic Development in Northern Ireland, and I said—if I may be forgiven for quoting from a speech of my own—
The Wilson Report says that the seemingly generous grants towards the capital expenses of industry, in Northern Ireland and elsewhere, are greatly reduced in effective value because the value of the grants is deducted from sums allowed against tax in the form of investment, initial and ordinary depreciation allowances. Is the margin of advantage enough?"—[OFFICIAL REPORT, 22nd February, 1965; Vol. 707, c. 56.]
What the Wilson Report, a very valuable document, said on the subject was this:
In the Development Districts and in Northern Ireland, 100 per cent. accelerated depreciation is allowed, and further assistance may be obtained with capital expenditure and to some extent with other costs. The list of measures is impressive, but it would be an error to suppose that the benefits conferred are simply additive. To a greater extent than may be generally appreciated, additional assistance under one heading may reduce the claim for assistance under another. The main reason is that when the State makes a grant to a firm the Inland Revenue regards this grant as directly taxable or as deductible from other allowances against tax.
Rather more succinctly, Professor Wilson said in his concluding recommendation:
If the United Kingdom Government were to introduce legislation which would protect the standard grants from the Inland Revenue, there would be greater clarity of thought about these matters and more coherence in public policy.
This Report was widely acclaimed at the time of its appearance. Winding up the debate on 22nd February, the Joint Under-Secretary of State for Economic Affairs replied in these terms:
The Wilson Report goes a good deal further than any Report of that time in suggesting the sort of policy which might be pursued in Northern Ireland which would meet the problem referred to by the hon. Member. I am sure that taking the Wilson Report as our text is the best means of trying to deal with the problem now."—[OFFICIAL, REPORT, 22nd February, 1965; Vol. 707, c. 101.]

That is really the point of what I say now to the Government. I hope that they will stick to that text because it is that text which is, to some extent at least, contained in these Amendments.

Mr. Gordon Campbell: I shall address myself to Amendment No. 534 which has been put down by my right hon. Friend the Member for Argyll (Mr. Noble) and several of my hon. Friends and myself representing Scottish constituencies. The effect of the Corporation Tax proposals is to reduce the investment allowances. This cannot be a step in the direction of modernisation. It is a proposal to reduce the allowances which are encouraging and which would further encourage the setting up of new and modern equipment in place of older plant and machinery.
There has been reference to the free depreciation allowances introduced in the Budget of 1963. I fully recognise the force of what was said by my right hon. Friend the Member for Bexley (Mr. Heath, that it took a bit of time for these allowances to be understood and their effect to be appreciated, but I can tell the Committee that in Scotland they have been a special factor, which, perhaps, they have not been generally elsewhere, in encouraging firms to come to Scotland. Since the 1963 Budget, the free depreciation allowance has been available in development districts for the installation of industrial plant and machinery.
Two points were raised by the introduction of the free depreciation allowance. First, it introduced a new principle of differential taxation. This was something which many of us in Scotland had been pressing for as a new help and incentive, but, of course, it can be appreciated that to take a new step and establish a precedent by adopting this principle was a major change liable to be opposed as creating a precedent leading to an immediate flood of water over the fall, starting all kinds of new ideas, and so on. But it was done. Secondly, as I have said, it was of particular value in Scotland and has encouraged firms to settle and expand there. Free depreciation has been one of the factors in the success of the Conservative Government's policy of bringing new firms and industries to Scotland.
It is noteworthy that, at the end of last year and the beginning of this year, there was quite a lot of comment in the financial and other Press about the improved state of the industrial scene in Scotland. Such papers as the Sunday Times, the Financial Times and the Economist have reported on the new developments there as a result of firms moving in. I draw particular attention to the electronics industry, which appears to have found conditions particularly suitable in the east and north-east of Scotland. Yesterday, when the Minister of Labour was answering Questions, there were many references to shortages of labour in the Midlands and south of England. There are not such shortages of labour in Scotland, and it is necessary to have incentives to bring about a more reasonable distribution of labour in the country as between the over-active and congested areas of the South and the areas in the North where industries have been contracting and there is unemployment.
The fruits of progress in development in Scotland are now to be seen, but the continuation of this process is hampered by the credit squeeze of the last seven months and now, on top of that, by the proposal to reduce the investment allowances. This is not what Scottish people expected as a result of the pre-election statements of the party opposite about regional development and planning.

The Secretary of State for Scotland (Mr. William Ross): Will the hon. Gentleman explain why in the first four months of this year the number of projects is greater than it was in the first four months of last year, why the amount of factory space taken is practically double what it was last year, and why the same is true of the number of jobs in prospect in the first four months of this year compared with last, the very period to which he has referred?

Mr. Campbell: If the right hon. Gentleman had read some of the articles I have mentioned, he would have known that all of them pointed out that this was the result of starts and work done months or a year or two years before. It takes time for firms to get into action on the ground after the original measures are taken and people decide to move to Scotland. I am

most disappointed that the Secretary of State should say something like that because it shows that he has not really understood the process.
However, I was referring to the comparison between what was said by the Labour Party before the election and what it is actually doing in office. The Labour Party manifesto stated that for Scotland, Wales and Northern Ireland and regions of England there would be inducements to firms to move to areas where industry is declining in order to check the drift to the South. It was also stated that a policy statement had already been issued for Scotland, entitled "Signposts for Scotland". On page 8 of that pamphlet the party opposite said:
At the same time inducements of various kinds, including special investment allowances and other tax reliefs, will be offered to industrialists who are prepared to take more jobs to job-hungry areas.
There is nothing in that passage to indicate a reduction in investment allowances. On the contrary, the clear impression is that they are to be added to or increased in value.
The hon. Member for Middlesbrough, West (Dr. Bray), who is not here at the moment, said that the amount suggested in our Amendment would not exactly retain the value of the present investment allowances. But it is not a question of the exact value. From that passage in "Signposts for Scotland" we get an indication that values are to be increased. Surely it is not a matter of working out exactly what equivalents would be in the circumstances now proposed for the Corporation Tax.
I want to ask the Minister without Portfolio—perhaps the Secretary of State for Scotland will be able to advise him—a number of questions. First, do the Government consider that, in these proposals or any other, they are carrying out that election policy statement about investment allowances and other tax reliefs in areas that require them in Scotland? Secondly, did the Government understand, when they were formulating these proposals for Corporation Tax, that they would have this effect of reducing the investment allowances? Thirdly, if they did not understand that at the time, or if they always knew what the effect would be, are they nevertheless, despite what they said before the


election, going to press ahead with these proposals in complete disregard of their previous statements?

7.15 p.m.

Mr. Gower: My right hon. Friend the Member for Altrincham and Sale (Mr. Barber) stated a very strong case for the Amendments. From hon. Members opposite we have heard a number of interesting but, in an academic way, rather remote suggestions for substituting some other method of making up and compensating for the reduction in the value of these investment allowances. But when all the verbiage is removed, if the Bill is passed without these Amendments the effect must be a net reduction in allowances which have now been enjoyed by industry for a considerable time.
Some doubts have been expressed as to the value of the allowances. I feel sure that many of my hon. Friends have, like myself, discussed them with industrialists and firms throughout the country, and in nearly every case the directors and managers to whom I have Spoken have expressed deep appreciation of the importance and value of the allowances.
No case has been made out to substantiate the suggestion of the hon. Member for Middlesbrough, West (Dr. Bray) that these are of doubtful value. Indeed, so obvious has been the value of the allowances that, during many years when we were in office, the party opposite constantly pressed for increases in this kind of concession. They constantly argued not only for increase in value but for extension of allowances to different parts of the country.
The Government seem in danger of discovering a single new answer to every problem. They appear to take the view that all our difficulties and all our future problems will be settled easily by the simple expedient of the introduction of the Corporation Tax. This is the magic sesame to a new world. It will make our industry more efficient, more competitive. It will enable us to sell in new markets. That is the exaggerated impression that some right hon. and hon. Members opposite have created, perhaps unwittingly.
If they think carefully about it they must recognise that, whatever improve-

ment this new form of tax may effect for the national bookkeeper or accountancy, great problems will remain which will not be solved by this alone. The fact that this tax may bring positive benefits I am prepared to concede, but beyond that the Government should not assume too much. To suggest that the loss of investment allowances now will be compensated for by the introduction of the Corporation Tax in future which our industrialists will learn to live with it in due course is a gross exaggeration.
There can be no immediate compensation for the loss of these allowances. I imagine that in Scotland, as my right hon. Friend the Member for Argyll (Mr. Noble) suggested, there will be great despondency about failure of the Government to accept the Amendments. I imagine that there will be serious despondency in many development districts. The Labour Party has boasted about the decline of the Conservative vote in parts of the country and the loss of seats in Scotland. Certainly, there will be despondency about the Government's failure to accept the Amendments in Rutherglen and many other parts of Scotland.
I am sure that my hon. Friend the Member for Tynemouth (Dame Irene Ward) will agree that there will also be despondency in many parts of the north-east of England. The people there were not led to expect this kind of thing in Sunderland or The Hartlepools and many other districts. There will be acute disappointment at the failure of the Government to honour their pledges, made clearly in opposition and during the election campaign.
The loss to companies will be a gain to the Exchequer. The Chief Secretary owes it to the Committee to state what other method the Government will adopt immediately—not in the future—to compensate our industries for the loss of these allowances which they have enjoyed for many years. What is the alternative now? We do not want pie in the sky. We do not want to hear of some new subsidy out of the working of the new tax. What fiscal or financial concession will be made by the Government to compensate now for the loss of these allowances?
The effect of the loss of these allowances will be felt most acutely in the development districts—in Scotland, in


the North-East, in Wales and in Northern Ireland. That is where the impact will be most severe. At the same time we know that the economy is in difficulties. We know the difficulty revealed today by the publication of the latest trade figures. We sympathise with the Government in their difficulties, but we do not believe that they will help to solve those other difficulties by exacerbating the problems of the areas of above-average unemployment.
This is hardly a modern looking Government. It is hardly a Government which will encourage industry to modernise and to introduce new equipment. It is now immediately removing one of the major incentives to that kind of modernisation, and I hardly believe that the Minister of Technology is a suitable alternative.
Although this loss of aid to firms may be relatively small, in some parts of the country it is a savage blow at the efficiency of the modern competitive British industry. It is a disappointment to development areas and to industries like shipbuilding. My right hon. Friend the Member for Altrincham and Sale put forward a case which the Government should accept. Certainly if they cannot accept the broad Amendment, the blanket Amendment, they should accept that relating to development areas and that relating to shipbuilding, and I hope that my hon. Friends will all take this view and vote emphatically in favour of these Amendments.

Mr. John Rankin: So far as I understand its effect, I agree that Corporation Tax will mean that taxation will fall more equitably on the individual and the companies and corporations affected by it, and to that extent I support it. I believe that it will be more just than the present system, because, according to my information, there are companies and corporations which pay practically no tax whatever. If that is the case, it is unjust when tax is falling so heavily on the individual.
It has been said that the debate has tended to segment itself. That is inevitable. It always happens when, as now, many interests are represented. The interest which has drawn me to my feet tonight is that of shipbuilding. It is the

main interest in Govan and if anything affects Govan detrimentally, I shall talk about it and, whether under this or a Conservative Government, I shall condemn it, just as I spent nearly 13 years in Opposition condemning the inactivity of the Tory Government which preceded the present Government, to which I am proud to belong.
However, I do not believe that there will be the gap in the operation of the Corporation Tax which the hon. Member for Barry (Mr. Gower) foresaw. I want to be assured that if there is to be a reduction in investment allowances it will not make the position of shipbuilding in Govan worse. I want to be, and I am entitled to be, assured of that. I have lived through the experience of 13 years of Tory misrule in Govan and I have seen the shipbuilding yards there reduced from three to two.
In 1951 we had three thriving active shipbuilding yards in my constituency. By 1961 we had only two. We used to have 10,000 men and women employed in those three shipbuilding yards, but by 1961, after 10 years of Tory misrule, there were only 5,000.

Mr. Edward M. Taylor: Would the hon. Gentleman accept that, because of the activities of the previous Government, the two shipyards in Govan now have longer order books than at any time since the war, that they can hardly get the skilled men they need and that both yards are looking for skilled men?

Mr. Rankin: The hon. Gentleman must not try to make my speech for me. One thing which is essential in my audience is that it should listen to me and interrupt me as infrequently as individual temperaments permit. The hon. Gentleman has stolen a little of the speech which I have not yet completed. I shall come to that very point.
I was explaining the change which had occurred in my constituency in 10 years when the number employed had been reduced from 10,000 to 5,000. All through that time the then Government did very little to remedy the situation. However, I concede that towards the end of their period of rule the then Government introduced a grant of about £80 million for shipbuilding and that


grant helped the industry. We have now achieved reasonable stability and both Fairfield and the yard at the other end of my constituency tell me that orders are good. Fairfield has two years of work on its order books and the other shipyard is equally well circumstanced.
That is a situation which I do not want to be diminished in any way. That is why I want my right hon. Friend to assure me and the people of Govan that this reduction in investment allowances will carry with it some compensation which will not interfere with the position now achieved, not only in Govan but in the shipbuilding industry throughout the country.
Shipbuilding does not live unto itself. It supports a whole bevy of trades—joiners, furnishers, painters, cleaners and furbishers of all kinds. Therefore, unemploment or threatened unemployment can create chaos in any shipbuilding area because so many are threatened. I hope that my right hon. Friend will assure me and the constituency which I have represented for nearly 20 years, and which has been faithful to Labour for nearly 50 years, that a Labour Government will be faithful to Govan and that in the long run this tax will be beneficial not only to Govan but to Great Britain and that it will assure stability and still further development of this great shipbuilding industry.

7.30 p.m.

Dame Irene Ward: The purposes behind the various Amendments and the new Clause which we are now discussing have been very adequately and very well put by my right hon. and hon. Friends. I shall not go into details, but I want to add one or two specific points to emphasise the problems which will arise if the Amendments which we propose are not accepted by the Chancellor of the Exchequer. There is one Amendment and one new Clause in which I am specifically interested and that is the decision of the Government with regard to the reduction of investment allowances in developing areas and the problems which arise out of the introduction of the Corporation Tax and the withdrawal of the investment allowances in relation to shipbuilding and shipping.
I want, first of all, to deal with development districts. Mr. George Chetwynd, who is now the Secretary

General of the North-East Development Council, has quite specifically stated that the introduction of the Corporation Tax will he a disincentive to new industries to seek their future in the development districts. That comes, as I am sure the Committee realises, from one of our ex-colleagues who was the Labour Member for Stockton-on-Tees before resigning his seat and taking up the secretaryship of this very important Council.
Though Mr. Chetwynd and myself were on opposite sides of the House, and were opposed in the fundamental philosophies which exist between our parties, I should like to pay tribute to the excellent work that he has done for the North-East Coast since he took up his appointment. He has made a great deal of difference to the virility, vitality and the livelihood in the area. I think that the fact that both industrialists and trade unionists have worked together in unity for the area deserves to be placed on record in the House.
When it is said by Mr. George Chetwynd that the introduction of the Corporation Tax will be a disincentive to the development of the North-East Coast most people there, in spite of the speech made by the hon. Gentleman the Member for Middlesbrough, West (Dr. Bray), will accept what he says. I put down a Question to the Chancellor of the Exchequer as soon as I heard of Mr. Chetwynd's statement about the disincentive aspect of the Corporation Tax. Subsequently I followed this up by writing to the Financial Secretary to the Treasury. Part of the problem of this "modern" Government is that there are so many Ministers that one never really knows which Minister is dealing with which problem.

The Chief Secretary to the Treasury (Mr. John Diamond): If the hon. Lady would forgive me saying so, there is one less at the Treasury than there was during the whole of the previous Government.

Dame Irene Ward: Yes, but the quality of those who are in the Treasury is all important. Certainly, I never had any difficulty when my party was on that side of the House in ascertaining which Minister was dealing with which problem. If I am here long enough I hope I shall find out a little more about the present occupants of the Treasury posts.
I wrote to the Financial Secretary to the Treasury and I wish to read out what he said because it lends weight to the Amendment we are moving in regard to investment allowances. This letter was written on 14th of June.
You mention in your letter of the 19th May George Chetwynd's recent comments on the effect of the Corporation Tax on the North-East, and you will, no doubt, remember that when he answered your Question in the House on that subject the Chancellor said that he did not share the views expressed. …
Of course, I might say that Mr. George Chetwynd knows a great deal more about the North-East Coast, having represented it as well as being the Secretary for the North-East Development Council, than the Chancellor of the Exchequer, who, I think, does not know very much about it. [An HON. MEMBER: "Or anything else."] The letter continued:
… the Chancellor said he did not share the views expressed, since a considerable margin of preference will be retained by the North-East.
That is the way the Chancellor answers the question. I think that it reinforces the point that has been made by my hon. and right hon. Friends that the reduction of the investment allowance is a factor in the future life of the North-East because this refers to the fact that there will be a margin left. The point is that it does destroy the confidence of industrialists looking for sites in various development districts. This is a confidence that has been built up over a period by the Conservative Party when we have done everything possible to encourage industrialists to move from congested areas to areas where jobs and sites were available.
The destruction of confidence in almost every field of Government has been the signature tune of the Socialist Administration. I hope that when the Chief Secretary replies he will not spend all his time in talking about the kind of speech that was made by the hon. Member for Middlesbrough, West, but that he will address his remarks to dealing with pledges specifically given by all the members of the Government at the time of the General Election.
There were many quotations which I shall not repeat. I am absolutely stunned to see the emptiness of the Socialist benches in this very important debate.

Mr. Rankin: But look at the quality.

Dame Irene Ward: When we go into the Division Lobby I shall be very interested to see whether the Chairman of the Parliamentary Labour Party will be supporting us, along with those who support him from the North-East Coast, since this Amendment deals with development districts.
The Financial Secretary went on to say:
I do not think there can be any doubt about our continuing concern for the North-East and the other development districts and I know that the banks are well aware of the need to have regard to our policy on regional development.
I do not want the hon. and learned Gentleman to have any particular interest in what the banks are doing. What I want to know is what the Government are doing, because this is their responsibility. If a proper lead is given by the Government to the banks to help in the development districts, we shall be only too grateful. But, as soon as it is possible, Ministers rush to put the blame on somebody else. This is another aspect of Government policy. They say that every man is out of step except the Government.
The Financial Secretary continued:
The guidance to the banks was couched in general terms, and it is for the banks themselves to take it into account, together with all the other relevant factors, when they are dealing with specific applications for advances. The relationship between the banks and their customers"—

The Deputy-Chairman (Sir Samuel Storey): Order. There is nothing about the banks in these Amendments.

Dame Irene Ward: I quite understand that. Sir Samuel, but there is something to do with the general financial policy of the Government. Therefore, when I make a complaint about the withdrawal of the investment allowance and the imposition of the Corporation Tax, if the Financial Secretary likes to take up the position of the banks as a defence for himself—

The Deputy-Chairman: Order. The hon. Lady must not be misled by the Financial Secretary into getting out of order now.

Dame Irene Ward: I imagine that it is very difficult for the Financial Secretary


ever to be in order. However, I have made my point.
Would the Chief Secretary deal with the pledges which have been made? It has been very well put by my right hon. and hon. Friends that there was no suggestion whatsoever before the election that there was to be a possible alteration about investment allowance policy. Having year in and year out from this side of the Committee attacked the policies of the Conservative Party and the extent of the allowances made to the development districts by the Government which I supported, I should have thought that before making the pledges which were made at the General Election and in speeches on various Finance Bills in the House the shadow Chancellor of the Exchequer would have already made up his mind, if he did not agree with investment allowances, what he was prepared to put in their place if his party was fortunate enough to win the General Election.
There has been no decision, no plan, no results from this talk about the Labour Party being poised for action. All we have had is words, words, words, which are the easiest thing on earth for politicians to produce. I want the Chief Secretary to deal with the pledges which were made by the Labour Party, and I want to know how he proposes to answer the criticisms of Mr. George Chetwynd and how he proposes to restore confidence to industrialists before they consider making a move to the development districts. The effect of the Corporation Tax and the reduction of the investment allowances is to say to industrialists, "Members of the Socialist Government did not mean one word of what they said during the General Election or in the speeches which they made in the House".
7.45 p.m.
I now come to my second point. I was absolutely stunned that the hon. Member for Middlesbrough, West paid no attention to the very important speech made by Sir John Hunter, Chairman of Swan Hunter and Wigham Richardson, on the views of his company and himself and his board of directors about the introduction of Corporation Tax. My hon. Friend the Member for Dorset, West (Mr. Wingfield Digby) put very clearly the views of the Chamber of Shipping,

and we have heard the views of a leader of British shipbuilding.
There is no need for me to develop in detail the points made about shipping and shipbuilding, but I want, once again, to point out that until we put forward our Amendments on, I think, Clause 46, no hole of any kind had, apparently been dug by the Treasury Ministers to deal with the problem of shipping and shipbuilding.
It is very disconcerting to great industries like shipping and shipbuilding, with all the implications about invisible exports and the balance of payments, that no attention had been paid to their needs before the introduction of the Finance Bill. I am bound to say that the Minister of State answered our Amendment in very smooth, honeyed words. What he said was very acceptable because he gave us great encouragement, and it has been very well received by the Chamber of Shipping which believed—I hope that it was right—the words spoken by him.
The Minister of State answered our Amendment on 3rd June, since when there has been some time in which the Government could have made up their mind about what they proposed to do to help these great industries. I do not think that the Chief Secretary, who is a technician of great standing in his own right, would disagree with me when I say that in industrial matters it is a very good thing to take notice of what the professional people who have to run the industries feel are necessary for their advancement. I therefore commend to the Chief Secretary the proposed new Clause and the Amendment dealing with the shipping industry, which has the acceptance and support of those who earn a livelihood, not only for themselves but for the nation as a whole.

Several Hon. Members: Several Hon. Members rose—

Dame Irene Ward: I am always glad when hon. Members are longing for me to sit down, but I have waited a very long time to speak. I have listened to Scotsmen, Welshmen and Irishmen putting forward views on behalf of the areas which they represent. I therefore see no reason why I should not put forward views on behalf of the area which I represent, even though on the North-East


Coast we have no Privy Councilors prepared to speak up because, as I have said, the right hon. Member for Easing-ton (Mr. Shinwell) has not graced the Chamber during this very important debate.
The Minister without Portfolio said:
It is within that context"—
he was referring to what he said about shipping—
that we have to consider whether there is anything that can be done within the four corners of the Finance Bill to help the shipping industry. As has been said, some of my hon. Friends and I have had discussions with representatives of the shipping industry. We are grateful to them for the suggestions they have made on how we can help them. We are anxious in this Committee to consider how far anything on the lines of these Amendments would be of value to the shipping industry. This is the problem."—[OFFICIAL REPORT, 3rd June, 1965; Vol. 713, c. 2075.]
This is the problem. There comes a moment when any Government must make up their minds.
When I listen to hon. Members of the Liberal Party talking on these matters, their argument is that everything must judged on its merits. That is a good phrase to British ears. There comes a time, however, when the judgment has to be made. I regret to say that the Government are falling into the Liberal way of life. We hear in these honeyed phrases that the Government are anxious to help the shipping industry and that they are trying to find what they can do within the terms of the Bill.
The professional people who are concerned with shipping, and, incidentally, with shipbuilding, have offered professional advice to the Government. If the Government are not willing to accept professional advice, those of us who are interested in the future progress of the shipping and shipbuilding industries will be anxious to know what the Government would put forward—

Sir D. Glover: My hon. Friend's speech is so compelling that the right hon. Member for Easington (Mr. Shin-well) has now come in.

Dame Irene Ward: I have always known that the right hon. Gentleman really likes me in private. He has been made a Companion of Honour, so he is now both a Privy Councillor and a Companion of Honour. I am sure that the

award by Her Majesty gave great pleasure to a great many people. [HON. MEMBERS: "Hear, Hear."] The country always likes to see acknowledgment of those who have served the interests of the nation, although not always in the way that I would like them to be served, and especially someone who has always been a figure in the House of Commons. I should like also to add my congratulations to the right hon. Gentleman the Chief Secretary.
Now that the right hon. Member for Easington has come into the Chamber, perhaps I might repeat what I said before. I am looking forward to seeing him strike a blow for the North-East Coast. Many a blow have I struck, and I am looking forward to him for once following my lead, even though he has become so distinguished.
I am looking forward to the right hon. Gentleman going into the Lobby tonight with those of the Tory Party who have spoken up for the shipping industry and for shipbuilding. The right hon. Gentleman gets on very well with those industries. That is the curious thing. I notice that the men of the industries are always agreeable to the right hon. Gentleman, and that he is always agreeable to them.
On this occasion, when the Minister without Portfolio is seeking for a way to give real assistance and help to this vital industry for the progress of the country, for our invisible exports, for the maintenance of employment and for keeping our yards up-to-date, alive and in full employment, I am looking forward to the right hon. Member for Easington leading his flock from the North-East Coast into the Lobby for an area where we have some very vocal Tory Members, but not so many Tory seats.

Mr. Robert Maxwell: Thank goodness.

Dame Irene Ward: That is not what the North-East Coast thinks just now. The North-East Coast would like a great many more Tory Members.
I conclude my speech by saying that this was what the Minister without Portfolio said on 3rd June. The case for the shipping industry has been well deployed by my hon. Friend the Member for Dorset, West (Mr. Wingfield Digby) and I am looking forward to the Chief


Secretary telling us, now that the Government have had time over the Whitsun Recess and, perhaps, when they were closeted in Chequers, what their proposals are. If they can better the proposals put forward by the professional interests, we on this side of the Committee will be very pleased indeed to hear them.

Mr. Stanley R. McMaster: I should like to add a few comments to those made by my hon. Friend the Member for Londonderry (Mr. Chichester-Clark). All of us in Northern Ireland are familiar with a document published on behalf of the Labour Party called "Signposts to the New Ulster". This was published as part of their election campaign and it no doubt contained a true statement of their intention about assisting Northern Ireland.
That document referred, among other things, to incentives and inducements which would be introduced by the Labour Party if they came to power, to the high interest rates which they had had under Tory rule and to how the Tories had created a slow and sluggish economy. I wonder how many of the electorate who read that pamphlet would realise that it was the same Government who advocated those things in that pamphlet who have now been in office for eight months. We are now entering upon the third 100 days. We all heard from the Leader of the Labour Party what wonderful things would be done in the first 100 days.
As to Amendments Nos. 320 and 321, I should like the Government to consider whether this is not, perhaps, the first opportunity for them to show their true intentions by bringing into effect some of the things they talked about in "Signposts to the new Ulster", as they did in their other documents relating to Scotland and Wales. If they want to create incentive and inducement, is their action in the Finuance Bill a true example of such incentive and inducement?
I wonder where the Government's planning that they talked about so boldly before the election has gone. In many debates on Finance Bills and other matters during the six years since I first entered the House of Commons, I have advocated strongly that the Finance Bill would be a suitable vehicle to help such areas as Scotland and Northern Ireland.
In those days, I always had tremendous support from hon. Members opposite, but it seems now to have evaporated.
The free depreciation which was introduced a year ago has been of considerable help in attracting new industry to Northern Ireland. Instead of this free depreciation, we find in the Bill provision relating to investment allowances which, instead of assisting our industries in Northern Ireland and instead of offering new industries inducements to go there, will deter industry from expanding, either in Northern Ireland or elsewhere.
The effect of Clause 52 is to reduce investment allowances—

Mr. Diamond: The hon. Member is all wrong.

Mr. McMaster: How can I be all wrong?

Mr. Diamond: The hon. Member has been talking about giving full relief and giving freedom for special depreciation, which is not affected. We are talking about investment allowances only and I am anxious to hear any new ideas that the hon. Member has on that subject.

8.0 p.m.

Mr. McMaster: The right hon. Gentleman has failed to answer the question. I said, and it has not been controverted, that investment allowances would be reduced as a result of the Bill. If I am wrong, I am willing to give way to the Chief Secretary so that he can explain why I am wrong. I see that he does not wish to intervene, so presumably he accepts that investment allowances will be reduced.
Northern Ireland has the highest rate of unemployment in the United Kingdom. At the moment, between 6½ per cent. and 7 per cent. of the population there is unemployed. We require 30,000 new jobs, and this at a time where there is over-full employment in the south of England. What better method is there than using this Finance Bill to induce industries to go to Northern Ireland where they can provide work for these 30,000 people who need it? The amount of capital invested on each person employed is rising rapidly year by year and there would have to be a substantial investment of capital to provide employment for these people. Each of the new industries which has gone


to Northern Ireland in the past 15 years has led to a large investment in such things as the production of synthetic fabrics and synthetic filaments, and if we want to attract more industries of a similar type, we must make it worth while for these high capital investment industries to go there.
I should like to deal particularly with the Amendment relating to shipping. The effect of this Clause will vary according to the rate of Corporation Tax. If the rate of tax is only 35 per cent. as was mentioned by the Chancellor on 6th April, the combined yield will be the equivalent of about 8s. 3d. in the £. If, on the other hand, the rate of tax is as high as 40 per cent.—and the Chancellor said that it would not exceed that, but the exact figure is not known—the amount of the investment allowance will be reduced. Amendment No. 322 has been tabled to ensure that investment allowances remain the same under this Finance Bill as they were previously. It says:
Provided always that the expenditure on the provision of ships in respect of which investment allowances are calculated shall for the purpose of corporation tax be deemed to be increased by 40 per cent.
The shipping industry today is operating on a very narrow margin of profit, and this is another factor which will affect the value of the investment allowance which is covered in the Bill. The companies covered have a low profit margin, and it is particularly important that they should receive the full benefit of the Bill so that they can compete against other countries which have a more liberal taxation system, particularly in relation to their shipping industries.
I am sorry that hon. Gentlemen opposite do not appear to be paying any attention to the arguments being put forward on behalf of the shipping industry.

Mr. Maxwell: We have heard them all before.

Mr. McMaster: Hon. Gentlemen opposite are ready to interrupt and to allege that what I am saying is incorrect, but they are not prepared to listen to the arguments. I find this rather appalling.
When shipowners in Britain decide to build new ships, they take into consideration the amount of the investment allow-

ance. Many of the decisions to order new ships were taken some time ago, and the financial details were carefully worked out. If the Bill reduces the value of the investment allowance, the decisions will be rendered false, and the companies concerned may lose money. Perhaps I might remind the Committee that about 86 per cent. of the orders received by British shipyards last year came from British owners, and when these owners are contemplating ordering more ships, they must be able to know with some degree of certainty what the value of the investment allowance will be. I suggest that the Amendments which we have tabled should be accepted by the Government to provide them with an easy way of fulfilling their promise to assist our shipping industry.
The amount of the investment allowance will vary with the profitability of the company, and also with the rate of Corporation Tax. I should like the right hon. Gentleman to give us an assurance that he will give favourable consideration to these Amendments, first, in relation to the development districts and areas of high unemployment, and, secondly, in relation to the shipping industry, not only because of the direct help which will be given to our shipowners if they are accepted, but also because, by helping them, we might help our shipbuilding industry.
Many of the main centres of shipbuilding are in depressed areas of high unemployment, such as Scotland, the North-East Coast and Northern Ireland. Although the order books are perhaps a little fuller, and look a little brighter than they did a few months ago, due to the work of the E.C.G.D., these orders will carry us forward for only about 12 months. The best customer of the British shipbuilding industry is the British shipowner, and I therefore suggest with all the force at my command that the Government should give favourable consideration to these Amendments.

Mr. E. Shinwell: I had not intended to take part in the debate on the Bill. It is much too technical for my liking. Indeed, occasionally when I have come into the Chamber and listened to the debates I have wondered whether any right hon. or hon. Member was familiar with every detail of the Bill. I


say that with great respect even to the Chief Secretary, who has put up a magnificent performance.
It would be very churlish of me if I were to decline the invitation extended to me by the hon. Lady the Member for Tynemouth (Dame Irene Ward) to take part in the debate and say a word on behalf of the British mercantile marine. I should like to offer my grateful thanks to the hon. Lady for her very kind observations about the honour which has just been conferred on me. It may be that some day the hon. Lady will be the recipient of a C.H. I can never hope to emulate her by becoming a Dame. That is a rather complex subject—almost on the verge of the pathological. Nevertheless, I am grateful to her and to hon. and right hon. Gentlemen on both sides of the Committee who have exhibited some degree of pleasure—I will not say manifestations of enthusiasm—at the honour that 1 have received.
Over the past years few hon. Members have worked harder than I have to persuade successive Governments to render service to the mercantile marine. Innumerable questions have I asked from the Opposition benches. Frequent speeches have I made, supported by the hon. Lady, the hon. Member for Belfast East (Mr. McMaster) and other hon. Members who are interested in the shipping industry. In parenthesis, I would say that there have been occasions when we have succeeded in inducing successive Tory Governments to agree to debates and when very few Members on either side of the House have attended. There were occasions when a few of our gallant band, on both sides of the House, spoke up on behalf of the mercantile marine in an empty Chamber—with the greatest respect to the right hon. Member for Bexley (Mr. Heath)—without being able to evoke a satisfactory response.
8.15 p.m.
After the passage of time we succeeded, by pressing the case against the background of serious depressions in the North-East, Ulster and on Merseyside, in persuading one Conservative Government to agree to the provision of credits. This has given an impetus to the revival of shipbuilding, and we look forward to even greater progress in the future.
But let us be clear about the situation. All the financial incentives in the world,

whether they be in the form of investment allowances or credits of one kind or another, will never provide for the British mercantile marine what can be provided by a reorganisation of the multiplicity of shipping concerns.
Some people have talked in terms of the proposed nationalisation of the shipping industry. The Labour Party is not proposing to nationalise the mercantile marine. That is not its policy. But it ought to be said that there has been an element of nationalisation in the mercantile marine in the past. This has happened in the Australasian Continent. It would not be unusual if that project were developed. I leave it at that. That is not on the carpet at the moment.
For many years all parties have sought to improve our mercantile marine and protect it not from elements in this country, but from outside elements—for example, the United States of America. I am by no means anti-American. The hon. Lady asked us to strike a blow on behalf of the British mercantile marine. The most deadly blow that has been struck against it in the past 12 or 15 years, since the end of the war, was the action of the American Mercantile Commission in deciding to adopt the flags of convenience and of discrimination policies. Indeed, it subsidised the American mercantile marine, which could not have carried on without heavy subsidy, thus militating against the success—

The Temporary Chairman (Sir Herbert Butcher): Order. I hope that the right hon. Gentleman will fairly soon come to the matters before the Committee.

Mr. Shinwell: I suspected that I was getting out of order, Sir Herbert, but I thought that it was necessary to say these things.
The Chamber of Shipping has sent me its memorandum, and I have had conversations with its members. I know these people very well. They are influential, highly intelligent, and very enlightened. We cannot ignore their propositions. But I am prepared to rely upon the assurance given by my hon. and right hon. Friends on the Government Front Bench that they will do everything that they can to lift up the shipping industry and to provide every practical encouragement to promote our shipbuilding industry.
I cannot speak about the Amendment with any knowledge, because I have not studied it. I deplore having to make such a confession. The hon. Lady and the hon. Member for Belfast, East are very industrious on behalf of the shipbuilding industry in their home towns. I can understand this, just as I can understand the efforts of my colleagues from Durham and Northumberland, who do everything they can to serve the interests of their constituents. That is the proper thing to do.
I make no complaint about the observations of the hon. Member for Belfast, East and the hon. Member for Tyne-mouth, but I ask them to understand that there is much more to consider than the provision of investment allowances, or the addition of those allowances to what is now provided for our mercantile marine, if we are to maintain the power and influence of the shipping industry, upon which we rely for our invisible exports—perhaps the only invisible exports we have, except for what we receive in the way of insurance commissions, and so on. If we are to help our mercantile marine we must rely not only upon Government assistance, but upon the shipping industry itself, which must make itself more efficient by a process of reorganisation.

Mr. Lubbock: I offer my sincere congratulations to the right hon. Member for Easington (Mr. Shinwell) on his recent honour. I also congratulate the Chief Secretary. It is particularly appropriate, in view of the fact that he seems likely to have a hard day's night, that his appointment as a Privy Councillor appeared in the same list as that which contained the Beatles.
I shall not say a great deal, because some of the speeches have been of inordinate length, and most points have been well covered. There are, however, one or two points which I should like to underline. We have come a long way from the investment allowances in the last few speeches. I would remind the Chief Secretary that the Royal Commission defined them as being intended to provide a fair incentive to investment in certain kinds of fixed assets. We cannot get away from this, whatever the Richardson Commitee has said about the lack

of incentive effect of the investment allowances, and whatever the N.E.D.C. may now say about the calculations employed by industrialists in deciding on their capital investment programmes.
It is perfectly true, and there is overwhelming evidence to prove it, that the investment allowances have not wholly succeeded in the effect which the Royal Commission defined, but they have partially succeeded. None of these authorities has tried to maintain that, in no case, has the existence of the investment allowances had some marginal effect in persuading an industrialist to invest in a particular piece of plant. I am sure that, in the case of the shipbuilding industry, which was argued in the last few speeches, this is particularly true, because one is faced with a piece of equipment which is of high value where the investment allowance is likely to be of great importance in coming to a decision.
The right answer to this is the education of management, which is a gradual process extending over a number of years. The right hon. Member for Bexley (Mr. Heath) said that perhaps managements have not had time to appreciate the advantages of the free depreciation allowances in the development districts, and no doubt this is true. But the investment allowances have been in existence for a number of years and one might therefore expect that accountants are gradually educating boards in the advantages they bring. Sooner or later I have no doubt that the same thing will happen with the free depreciation allowances. Just because not every industrialist has taken advantage of this, I do not think that it justifies the general contention on the other side of the Committee—expressed in the first few speeches—that investment allowances have failed and that they should be replaced by another system.
That is not what we are talking about. We must take this Finance Bill as we find it and either put forward proposals for improving the investment allowances, or—as I dare say the Government will say—leave them as they are. There may be something in the arguments of the hon. Members for Ashton-under-Lyne (Mr. Sheldon) and Middlesbrough, West (Dr. Bray), that a system of investment grants would have a greater effect. Psychologically this is true, and if one


were able to give the same amount of concession by means of a grant rather than by the investment allowances, it would be more likely to be taken into account in the calculation of the industrialists. But that is not the point which we are discussing. We must await a further Finance Bill, when, perhaps, these hon. Members could put down an Amendment. Considering how strongly they appeared to feel, I am surprised that they did not do so on this occasion.
The use of discriminatory allowances, I think, also has something to commend it. We were reminded again by the hon. Member for Middlesbrough, West that this was one of the recommendations of the Royal Commission. We should perhaps narrow down the field within which investment allowances are granted at certain levels. We might discriminate, for example, between computers and numerical control equipment, machine tools and so on. This will be an extremely difficult job, because one will have somehow to decide whether one piece of productive equipment is of greater value to the national economy than another.
The right hon. Gentleman may tell me that he thinks that it would be more advantageous for a machine shop to have a Cincinnati milling machine than a Victoria milling machine and that he will grant the investment allowances at a rate of 25 per cent. on one and 20 per cent. on the other. It would be a very invidious task for any Chancellor of the Exchequer to try to distinguish between certain categories, although I think that it could perhaps be done within very broad categories, such as, for example, computers, which one wants particularly to encourage in the national interest.
As I say, this is for some future Finance Bill, and one has to consider the effect of the Corporation Tax on the investment allowances as we find them. The hon. Member for Middlesbrough, West said that he was not sure whether hon. Members on this side of the Committee were arguing about the profitability for the shareholder or that of the companies which they were discussing in putting forward this series of Amendments. I should like to give the Chief Secretary an example. These figures are taken from those of an actual company,

though standardised for the sake of simplicity, and they show that, whether one looks at it from the shareholder's point of view or from that of the company, they will be worse off under the new system.
This is a company in which we shall take the profits as being £100 and the tax profits—that is, after the investment allowances—as being £80. With the existing system of Income Tax at 41¼ per cent. and Profits Tax at 15 per cent., there is a net of £55 and this company retains for development, we shall say, £22, leaving a net dividend for the shareholder of £33. As the Chief Secretary knows, in presenting this, it would be grossed up and it would be presented as a £56 gross dividend, less tax of £23—net cash, £33. I should like to tell the right hon. Gentleman what will happen to this company if one keeps either the retentions or the distributions at the same level, and I will show him that, in either instance, the amount of tax paid by the company will increase.
Again, we have profits per the accounts of £100 and the profit on which the taxation is calculated after investment allowances of £80. I am assuming that Corporation Tax will be at 40 per cent. One has to take some figure and I think that it would be wise—considering that the Chancellor has not said that the Corporation Tax will definitely be at a lower level than 40 per cent.—to take this percentage in making one's reservations for the next year rather than 35 per cent., which we have been given the impression is more likely. We then have, first, the Corporation Tax, leaving £68 and we shall assume—that the same amount is ploughed back—which, I said, was £22. That leaves a gross dividend to the shareholder of £46, as opposed to £56 in the case of the existing taxation system.
Therefore, the decrease in the net dividend in the example which I have quoted—if the retention is the same—is 18·1 per cent. Now let us see what happens in the case of maintaining a dividend at the same level. Again, we have profits per accounts of £100, profits on which tax is calculated of £80 and Corporation Tax of £32. It will be remembered that I said that the gross dividend under the existing system was approximately £56, so we deduct that £56 from £68 and we are left with roughly £11·8 retained, as


opposed to £22 in the first case. The decrease in the retention is, therefore, 46–2 per cent.
I will give the Chief Secretary the figures if he finds them difficult to follow, but I assure him that in the example I have quoted the company cannot win, whether it decides to keep its retentions the same or to keep the dividends the same. In either case it will pay more taxation.
This gives the lie to hon. Gentlemen opposite, including the hon. Member for Middlesbrough, West, who say, "Why should companies worry about the investment allowances when the overall amount of taxation which will be demanded from them will be less and when they will be free to plough more back?" In many instances this will not be true and the future productive investment programmes of these companies will be damaged. That is why I support the Amendment.

8.30 p.m.

Mr. Diamond: We have had a very long debate indeed on a most important topic. Hon. Members are interested in both the general principles involved and the effects of the provision on the industries and areas with which they are particularly concerned. It would probably be convenient if I now gave the Government view on the various Amendments we are discussing, since the Committee has spent about four hours on them and since I am sure that all hon. Members want to get on with the Bill. We do not want it with us for too long.
I thank the right hon. Member for Altrincham and Sale (Mr. Barber) for the courteous remarks he made about me, and, more important, I join with him in the felicitations which he offered to the Chairman of Ways and Means. Perhaps nobody more than I knows how pleasurable he must find his present situation.
I am bound to spend some time in replying to the debate because of the variety of points which have been raised and the variety of industries which are affected, but, in particular, because I have the difficult task of adjusting minds to the facts and arguments which hon. Gentlemen opposite are showing a strong disinclination to accept. I hope, therefore, that, if I go over some of the things

which have been said before, the Committee will understand that I do so because the speeches which have been made today—and I have listened to every one of them—have expressed the same arguments which have been adduced time and again and which are based on a refusal to recognise the impartial evidence which is before us.
All hon. Members, without exception, are anxious to encourage investment. That is the starting point. We want to encourage it by the best possible method. We are today involved in the constructive task of examining whether the present method is ideal, whether the advantages which are alleged to arise from the present method should be increased, or whether there should be other methods which would be more helpful in achieving the agreed objective of increasing the level of investment.
We must, first, look carefully at the extent to which the investment allowances provide the kind of inducement, stimulus and incentive to invest which they were hoped to be and which they were held out to be when they were introduced by the party opposite in 1954, and the rates of which have been varied from time to time. I remind the Committee of the conclusions which have been reached and the evidence which is available to us. The evidence is strong and it is all one way. I also remind the Committee of what was said by the Radcliffe Committee. The F.B.I., in its evidence, said that only 23 per cent. of about 1,600 firms which it had questioned
… stated that their investment decisions since 1957 had been materially affected by favourable changes in investment and initial allowances and 15 per cent. by unfavourable changes".
Then the Richardson Committee reported on turnover taxation and stated that almost all the witnesses who had appeared before it had said
… that factors other than taxation largely determined investment decisions".
Then, in an article published in the November, 1964, issue of the National Institute Economic Review entitled "Replacement Policy" Mr. Robert Neild drew the conclusion from an inquiry which he had conducted that 82 per cent. of companies did their calculations for replacement decisions on a pre-tax basis;


that is, that they did not take into account the tax saving from capital allowances and any opportunity from investment allowances, although the objective of the latter was to help in this sphere.
Then there was the examination carried out by Mr. D. C. Corner, University of Exeter, and Mr. Alan Williams, University of York, who reported in February of this year similar results to those of the F.B.I. survey in 1957 to which I have referred. I must draw the Committee's attention to the dates because the feeling has been expressed in many speeches that although it takes a little time to get used to the fact and realise that there are such things as investment allowances—and, more recently, free depreciation—as the years go by people in making their decisions have regard to the whole of the facts including, very largely, the investment allowances. We therefore find that the 1957 Report is repeated almost exactly.
Finally, and this is the most disappointing report of all, the Management Consultants' Association in a survey authorised by the N.E.D.C. and the Machine Tool Trades Association, found that 95 per cent. of the sample engineering companies it interviewed last year said that tax allowances had little or no direct influence on their investment decisions—95 per cent. It would be wrong to ignore the whole of that evidence. It covers a long period, it is precise, it goes to reliable sources and it all points tile same way. It is no use our jumping to conclusions about what should be done; it is far better to have regard to what has been done, and what is still being done.
What, then, are the general criteria, if they are not tax considerations exclusively—and I do not think that anybody would any longer allege that they are—on the basis of which these decisions to invest or replace are made? The Richardson Committee dealt with this point fully and carefully. It said:
… all our witnesses … were broadly agreed … that factors other than taxation largely determine investment decisions. Witnesses put these factors in various ways: the compelling need to keep capital equipment up to date and, if possible, ahead technically of that of competitors; the need to improve product quality and manufacturing efficiency and to reduce costs; the growth and potential of a

particular market; the general growth and development of the business".
These are all very relevant considerations, and everyone who has had experience in this field knows that they enter into such decisions. The Committee goes on:
We asked witnesses specifically whether they looked, in judging investment projects, at the net return after payment of tax which the investment was expected to produce. Three witnesses said they looked principally at the return after payment of tax. The remainder said that they looked principally at the return before payment of tax. … We think"—
that is, the Richardson Committee—
that most medium-sized and smaller companies would also look principally at the return before payment of tax. Witnesses justified this way of looking at the return mainly on two grounds: they felt that it was the profitability of a project before tax which provided the financial motive to proceed with it, and if it proved successful the profits provided the funds out of which to pay the tax. Some witnesses also said that in making investment decisions it was necessary to look ahead over a period of years and, since it was impossible to forecast tax changes, it was better to leave this element of uncertainty out of the calculations.
I do not say for one second that these criteria are irrelevant or not worth taking into account. On the contrary, I think that they are all extremely valid. I believe that businessmen who reach decisions on this basis are fully justified in making their decisions in this way. I regret that they do not fully take into account further matters relating to the investment allowances. I regret that it is not open to all of them to use the latest methods such as the discounted cash flow rate and to be advised in that respect. But it is wholly wrong, and it would be moralising which no one would stand for a second, to say that businessmen should be doing something or other and that it is wholly wrong of them to run their businesses in a particular way. We have to recognise that this is the method by which they reach their decisions—

Mr. Ian Lloyd: I thank the right hon. Gentleman for giving way, but are we not in danger of reaching a rather dangerously biased conclusion on the question of the use of discounted cash flow? Of all the surveys to which the right hon. Gentleman has referred, not one has attempted, to my knowledge, to quantify the capital invested by the proportion of firms which do use these techniques, and as most


of these things generally follow a log normal distribution one could expect from the F.B.I. survey that 23 per cent. of the firms probably accounted for 85 per cent. of the capital investment.

Mr. Diamond: No. I do not think one can jump to those conclusions. But certainly I readily accept what the hon. Member said in principle, that numbers of firms do not mean a fair comparison in size, or a fair comparison in assets used, or in investments made or in numbers employed. It would be astonishing if some of the biggest firms in the country did not make use of some of the up-to-date methods of taking every relevant consideration into account. All I am saying is that one is bound to recognise what is going on and what has been going on for a very long time.

Mr. McMaster: Did the Richardson Committee, or the other Committee, take any evidence from shipowners on this question?

Mr. Diamond: I am coming to the question about shipowners later. The point about the Richardson Committee is that the witnesses did not regard their practices as at all antiquated. They justified them. They said, "This is a sensible thing to do." They did not say, "Oh, this is a brilliant idea to take account of tax. We did not think of that; we ought to have done." They said that it is unwise, having regard to possible variations in tax and experience of the variations of tax and rates of investment allowance which have taken place since 1954, to place too much reliance on this, and the sensible thing is to have regard to pre-tax profits if a profit is made and one is taxed on it.
There is a great deal to be said for that. No one is attempting to moralise. All one is doing is looking at the situation and saying that these are the facts and this is perfectly understandable. I regard it as extremely understandable when one takes account of the tax code which has existed hitherto. One is saying to businessmen that they must be stimulated by the most remote and abstruse calculation of a tax relief which is going to help them possibly some years after the consideration they are giving it at the present time. If we think of an investment re-

quiring a year's advance consideration—which is not a very long time for a major investment but a short time—after the time the decisions are considered there will be a year's lapse before payment is made and after the payment is made there will be on average 18 months or perhaps two years before any relief is given in tax. The relief given is so complicated that the sum which the hon. Member for Orpington (Mr. Lubbock) read out is absolutely straightforward by comparison.
I should weary the Committee if I tried to explain the different kinds of capital allowances and recurrent allowance, initial allowance and recurrent allowance, which relate to Income Tax and Profits Tax and to separate periods for accounting. It is beyond the capacity of any businessman in the country to say in regard to any investment he is making what measure of relief it will have for his tax bill and his bank account. I am glad to receive professional nods of agreement from my hon. Friend on a back bench, the hon. Member for Heywood and Royton (Mr. Barnett).

Mr. Heath: Is it not a confession of failure both by the Chief Secretary and his hon. Friend to say that they cannot make it perfectly plain to a firm that it is to its own benefit to take an investment allowance?

8.45 p.m.

Mr. Diamond: We can all take jocular remarks. Sitting on this bench we have to learn to take them. The serious point about what the right hon. Gentleman has said that it is implicit that he agrees with me that the non-technically qualified businessman—I mean "technically qualified" in terms of taxation—is unable to say what the measure of tax relief under the present system will be in respect of an investment he is about to make. He merely knows that it will be long postponed, that it is wholly remote, and that it is impossible for him to calculate it. If it is alleged that those are the three ingredients of a direct stimulus to investment, I invite the Committee to think again. Of course they cannot be, and the evidence is that they are not.
The real question is: what incentive effect do investment allowances have and why is everybody so keen on them? There is no question but that people are keen


on them. All the speeches made by hon. Members opposite today have been in favour of, not against, investment allowances. I am saying that there is not a direct, recognisable and valuable inducement in terms of the amount of money involved, which I shall come to in a moment. They are not a valuable inducement and stimulus to investment. What they are a stimulus to is tax saving. That is what is involved. That is why they have gone up.
Let me indicate what has been happening about investment allowances over the years. First, their spread. When the House of Commons first introduced investment allowances, they were intended for such things as plant and equipment. We all knew the sort of things we were endeavouring to encourage. They now cover a whole variety of things quite legally, as a result of interpretations by the courts. I do not know whether hon. Members on both sides fully appreciate that they cover, for example, knives and forks in hotels. They cover gaming machines.

Sir D. Glover: Why not?

Mr. Diamond: They cover perishable stores, such as ropes and tarpaulins. They cover foundation garments. With the Corporation Tax at 35 per cent., these fringe or extraneous items cost about £50 million in tax. I do not think that it was the intention of Parliament that this kind of item should rank for investment allowance.
It is not only the question of direct sales. There is the problem of leasing. By leasing, a lessor who carries a stock of plant of some kind or other and who leases it out is entitled to the investment allowance. He gets the investment allowance and accordingly passes it on by a reduced rent to the lessee. The lessee may not be a person who would be entitled to the investment allowance. He may be using the plant in an entirely different way. As a result of this perfectly legal right to the lessor to have the investment allowance there has been a tremendous spread of the practice of leasing such things as television sets, washing machines and similar items. I do not think that it was the intention of the House of Commons that vast numbers of television sets which go into homes all

over the country should be the subject of an investment allowance.
The cost has mounted very considerably. I am talking about the investment allowance today. The tax rate is then applied. In 1954 the cost of the investment allowance was about £100 million. In 1964, 10 years later, it had risen fivefold; it was over £500 million. It is estimated that in 1965 it will amount to more than £550 million. That is the combination of the spread of the items and the increase in the rates. The rates have risen, too.
As a result, the cost to the Exchequer was over £300 million in the past year. I conclude from all this that large sums of taxpayers' money are involved and it is very questionable whether the kind of stimulation which these allowances are intended to give is being given. Therefore, one has to start to consider, having regard to this vast amount of money, whether we are getting value for it, in terms of the Estimates Committee, for example, or whether we should consider some other method.

Mr. Keith Stainton: The Chief Secretary has posed the question whether we get value for money, in tax presumably, on certain items such as television sets which by process of leasing qualify. Could the right hon. Gentleman kindly break down for us into these undesirable elements and the desirable ones this total cost to the Exchequer of £300 million? Only if he breaks it down this way can he sustain his arguments.

Mr. Diamond: I thought that I had already indicated that fringe items cost £50 million. I have not the figure for leasing, but it is much smaller than £50 million.

Mr. Heath: A cost of £50 million to the Exchequer?

Mr. Diamond: Yes.

The Earl of Dalkeith: How much of this extra cost to the Exchequer of £300 million is in respect of allowances which were introduced by the previous Administration to enable the Scottish economy to expand and improve?

Mr. Diamond: I could not say that. The previous Administration could not say this. Nobody could say that. I am afraid that the answer to a silly question is bound to be a silly answer. [HON. MEMBERS: "Oh."] I am sorry to put it in those terms. I am sure that the noble Lord will realise that it is quite impossible to separate the economic effect of any of these allowances in terms of Scotland and England when we have a united economy. All the arguments put forward today have been based on a complete fallacy and misunderstanding, as if one could endeavour to extract from every single item its effect separately on England, Scotland and Wales. I hope that the noble Lord will realise that I was not being personally discourteous but was trying to show that that kind of question is impossible to answer however anxious one might be to answer it.

Mr. J. Bruce-Gardyne: Has the right hon. Gentleman considered examining the Inland Revenue reports? Those contain a clear breakdown of allowances to individuals, to partners, to companies and to local government in Scotland. The figure, for instance, for 1962–63 was £139 million. This is a specific figure and surely is precisely what my noble Friend the Member for Edinburgh, North (The Earl of Dalkeith) was asking about.

Mr. Diamond: Quite to the contrary. What I said to the noble Lord is the right answer. It is quite meaningless to pretend that one can relate the effect of an investment allowance on a particular item of plant to its use in Scotland or in England when we have a united economy. Unless we put up a complete barrier between England and Scotland it is quite impossible.
We have therefore got to the stage where we are spending a great deal of taxpayers' money on a purpose which is clearly not being achieved as was intended, and we now have to consider what is the best way to move from that point. The Opposition think that we should move in the way suggested in the Amendments. They think that we have a number of problems and that we should accentuate them by putting on 40 per cent. That is no answer. Incidentally, it would cost £80 million in tax if we were to adopt the proposed Amendments.

Mr. Barber: Will the right hon. Gentleman tell the Committee what the saving to the Exchequer is on investment allowances as a result of the Corporation Tax?

Mr. Diamond: I have already given way eight times. The right hon. Gentleman sets a bad example to his hon. Friends because he anticipates the rest of my speech. If he will be good enough to contain himself in the same courteous way as he has hitherto, he will find that all these questions will be answered. Perhaps I may be allowed to carry on with my speech.
I am dealing, first, with the proposal contained in the various Amendments as to how we could deal with the unsatisfactory situation which I have explained. I have explained that simply to make an increase of 40 per cent., as a method of having the "value"—I put the word in inverted commas—of the investment allowances retained at their present value, assuming a 40 per cent. Corporation Tax, is no way to deal with the situation. It introduces additional problems. It introduces the problem of having a different rate for companies, for partnerships and for individuals. It makes the matter more complicated. It would have to be a rate varying each year if the Corporation Tax itself varied. There would have to be a varying percentage in order to keep it in line. It is only an approximation. Moreover, it is an entirely premature proposal because it is based on a 40 per cent. Corporation Tax, and nobody knows what the rate of Corporation Tax will be.

Sir D. Glover: Oh?

Mr. Diamond: Yes, that is so.
Those are the minor arguments, but beyond them there is the major argument that the Opposition's proposal is based on a completely fallacious argument. It is based on the assumption that investment allowances are a subsidy. They are not. They are a tax relief. They vary with the standard rate just as any other allowance varies with the standard rate. The child allowance varies with the standard rate. No one will pretend that, if one alters the standard rate, the child allowance should each time be increased or reduced by a percentage so that its so-called value


remains constant. Take any item in one's profit and loss account. For example, the "value" of the rates which a businessman pays alters if the standard rate alters.
It is an impossible approach to say that one must take just this side of the equation and say that as any particular allowance varies according to the standard rate here is an implicit argument that it should be maintained constant and be altered each time. When the Chancellor announced in November that the standard rate of Income Tax would go up from 7s. 9d. to 8s. 3d., I heard no cheers or cries of "Good; our investment allowances will now be increased". Yet this is what the whole argument is based on. A few moments ago, the right hon. Member for Altrincham and Sale asked me about saving. There is no saving. There is no cost. We are proposing one method of taxation in place of another. In calculating the tax and the relief, a certain procedure is followed. It does not make any difference in the end. This is why I said that I should have to explain the matter carefully because hon. and right hon. Members opposite are so engulfed in their fallacious thinking that they will not open their minds to the facts.
Let us take the simple example of a company which is making a profit which is exactly equalled by its investment allowances. It makes a profit of £100,000 and its investment allowances are £100,000. It has no tax to pay. Whether the rate is 35 per cent., or whether it is one system or another system makes no difference whatever. We shall never get this matter straight until everyone realises that what we are talking about is the method of calculating a relief, and it is not a subsidy. I agree that it is a very odd form of relief. To have any relief over 100 per cent. is an odd thing to do. It was done by the Government in 1954 and we supported it, but it is a very odd thing to do and it brings all sorts of anomalies in its train. If one wants to get to the root of the matter and see what should be done, the first thing to realise is that it is not a subsidy but a method of calculating a relief given by way of taxation.
9.0 p.m.
As I have said there is the difficulty that we are spending a great deal of

money but are not achieving the objective that we want to achieve. There are certain unsatisfactory results and the Amendments would not serve the purpose. Thus, the question I shall be asked is what the Government intend to do about it. We intend to do two things.
First, we shall encourage every corporation to invest more by its tax being calculated in such a way as to give it the greatest possible inducement to invest. That is the Corporation Tax. As a result of the Corporation Tax collecting the same total value that would be collected under the present system, every company having paid its Corporation Tax, will have approximately half as much again available for investment, if it wants to invest, than it has at the moment. That will be the first stage.
A corporation will make its profits. It will pay the Corporation Tax and will have left to it a figure almost precisely 50 per cent. more than is left over at present, which it can use as it wishes—to pay dividends, to invest or plough back. It will not be under any great difficulty about meeting its dividends as it has hitherto done. Any company which covers dividends about 1·45 times will be able to continue the same dividend.
A high distributor will have to pay more tax; a low distributor will have to pay less. All low distributors will pay less. All those concerned more to plough back than to distribute will pay less. That is the basis of the Corporation Tax. That is the greatest possible inducement or incentive—having the cash there to further investment.
Secondly, we propose to do what my right hon. Friend has already said—to conduct a very full review of the alternative methods, many of which have been discussed today, of encouraging investment in all industries, including shipping. If more than £300 million is not producing the results we want, it would be irresponsible of us to continue a method of that kind and, therefore, as my right hon. Friend has said, we are reviewing the whole position.
It is not a simple matter to see whether we should or should not have some entirely different method of encouraging investment. Various means have been suggested by hon. Gentlemen on both sides of the Committee. It is suggested


that the method should be more direct, that we should have something much more like grant or subsidy, that it should be more specific, that perhaps it should be varied in rate, that perhaps there should be regional variations, that it should be selective with regard to items which are more efficient than others.
All these are difficult questions which must be looked at. Then there is the question of whether business men as a whole would want variations of this kind. Certainly, the present system is unsatisfactory and we must look at something entirely different. That is under examination at the present time.
Having dealt with the general problem I will now deal more specifically with the Amendments, but shortly because I think that the general arguments have dealt with the main problem. One Amendment deals with development districts. Here, there has been a complete misunderstanding. The real comparison is between the present situation and the new situation. It concerns what marginal advantage there is in comparing development districts with non-development districts and how that marginal advantage will be affected by the Corporation Tax.
Putting it simply—and this is a simple calculation which I am now making—the present advantage in terms of plant and machinery in development as opposed to other districts is approximately 2·6 per cent. at the present rate of tax. With Corporation Tax at 35 per cent., that marginal advantage of 2·6 per cent. would be more than doubled to 5½ per cent. The answer to the hon. Lady the Member for Tynemouth (Dame Irene Ward) is that the present advantage which development areas have in respect of plant and machinery will be more than doubled by the institution of Corporation Tax. With buildings, the present marginal advantage is 8·8 per cent. and that will be nearly doubled to 15 per cent. The effect of introducing Corporation Tax is more than to double the marginal advantage for plant and machinery and nearly to double it for buildings. Therefore, there is no difficulty in answering her question—the proposals in the Bill will improve the situation and not the reverse.

Mr. Higgins: Of what are the percentages which the right hon. Gentleman has just quoted percentages? Would

he not agree that the effect of the Corporation Tax without the Amendments must be to reduce the incentive to invest in development areas?

Mr. Diamond: Of course I do not agree. I have given figures calculated in a rather unsophisticated way. I have taken all the advantages as being current and I have not discounted them over the period—which is the problem with investment allowances—and, including all the preferential allowances given to development districts, with present tax rates there is a marginal advantage of 2·6 per cent. while with Corporation Tax at 35 per cent. that marginal advantage will be 5· per cent., more than double. I hope that I have made the position clear.

Mr. Higgins: Percentage of what?

Mr. Diamond: Percentage advantage in terms of investment as compared with other areas.

Mr. Higgins: Percentage of what?

Mr. Diamond: If the hon. Gentleman will read my speech tomorrow, I think that he will understand.

Mr. Higgins: Percentage of what?

Mr. Diamond: Can I put it in even simpler terms? At the moment there is an advantage to businessmen to go to development areas and to invest there. That advantage will be approximately doubled as a result of the introduction of the Corporation Tax. I hope that that has made it clear.
I now turn to the subject of shipping. All hon. Members are anxious to see that we have a healthy shipping industry, and we do not at the moment. The present position is that shipping profits are running at about 2 per cent. of capital invested, as the hon. Member for Dorset, West (Mr. Wingfield Digby) said. That is not in a particular year but is an average yield. The investment allowances give total allowances of 140 per cent. of the investment made—the investment allowance on a ship is 40 per cent. and with the other allowances that gives 140 per cent. of the investment made. It is not surprising, therefore, that investment allowances are greater than the profits being made.
What is happening at the moment is that shipping companies are accumulating enormous sums in unused credit, as it were, of allowances of which they are unable to make use, because they are not making the profits against which to set them. In fact, at the moment the figure, as given by the Chamber of Shipping, is more than £150 million credit notes which the companies cannot use. What is now proposed by the Opposition is that those credit notes should be doubled, trebled, or in some other way increased.

Mr. John Tilney: Mr. John Tilney (Liverpool, Wavertree) rose—

Mr. Diamond: The hon. Gentleman wants to say that that is absolute nonsense.

Mr. Tilney: That is not absolutely true of all shipping companies. One on Merseyside has paid £5¾ million in taxation in the last 10 years.

Mr. Diamond: I am not saying it is true of every single company. I am just taking the average at the moment. The hon. Member for Dorset, West who spoke on behalf of the shipping industry made the point that the average return was 2 per cent. and said that the way to deal with it, therefore, was to increase the investment allowances as a result of which the unused credit notes would pile up more and more. At the moment there are over £150 million. All I am saying to the hon. Gentleman, and I do not want to stimulate him into a long speech, is that we both want to help the shipping industry. I do not think that is the best way of helping it.

Mr. Wingfield Digby: Does the right hon. Gentleman not recognise that the shipping industry has been through a number of difficult years? Does he really say it can never expect to be highly profitable again? We all hope this figure of 2 per cent. will rise much higher.

Mr. Diamond: We all hope it will, but the figure of 2 per cent. is the hon. Gentleman's own figure, and the right figure. It covers an average period of years and we hope it will rise. But it is not the job of the Government to sit upon its seat and continue to hope. It is the job of the Government to do something. The thing to be done is not to accept the Amendment which will not

help the shipping industry at all. It will merely give it a lot more credit notes with which to paper the walls of its offices. That is no use to the shipping industry. There are one or two cases where profits are being made, but they are few and far between. Some companies are making profits sufficient to absorb the investment allowance and pay the tax as well, but I do not think that this is a group of Amendments which would help investment, the shipping industry and, as I have explained, Scotland.
We have here the real problem of encouraging investment. A great deal of money is being spent on it and I think the industry and businessmen deserve more of us than that we should go on with a method that is not serving their interests and accept Amendments which are based on a wholly mistaken view of the real nature of the investment allowance.

Mr. McMaster: Is the right hon. Gentleman not aware that to take an average like this is grossly unfair? If there is an average of 2 per cent. it means that at least more than half of the companies concerned are making more than 2 per cent. We want to encourage the successful companies and it will only be the successful companies who can afford to invest, and by passing this Amendment we will be helping the successful companies.

Mr. Diamond: I want to help shipping companies in Northern Ireland just as much as the hon. Gentleman and the answer to that suggestion is "No", otherwise one would not have a situation in which more than £150 million of unused credits exists already.

Dame Irene Ward: When the Treasury received representatives from the Chamber of Shipping and put that case to them what was their reply in view of the fact that they required and desired this Amendment?

Mr. Diamond: The hon. Lady had best consult the Chamber of Shipping. We are having conversations with it. Several conversations have already taken place and it is the desire of the Government that the shipping industry should be helped in a much more realistic way than this paper method suggested by the Opposition.

Mr. Geoffrey Lloyd: I fear I cannot congratulate the right hon. Gentleman the Chief Secretary to the Treasury on his maiden speech as a Privy Councillor. It was, first of all, marred by a gratuitous piece of discourtesy to my noble Friend the Member for Edinburgh, North (The Earl of Dalkeith) who asked a very reasonable question about the application of these figures to Scotland. It was said by the right hon. Gentleman that it was a silly question. My hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) then pointed out that the Inland Revenue is not used to producing figures simply as silly figures but that it produces figures that are very much to the point.
9.15 p.m.
The right hon. Gentleman said that we are embedded in our fallacies and that we cannot come out of them. On the contrary, we feel that he is arguing in a circle from a series of fixed propositions which, admittedly, the Government agree with but which we do not accept. This is the real reason why we are unable to accept the deductions that he seems to think follow so easily from the propositions which he asserts.
I thought that my hon. Friend the Member for Portsmouth, Langstone (Mr. Ian Lloyd) put his finger on one of the greatest weaknesses in the case of the Chief Secretary. In dealing with the question of the attitude of a particular company to the investment allowances, he asked about the number of very large companies which had been said to be uninfluenced or influenced by these allowances. The Government base their whole case for the principle of the Corporation Tax on the idea that it will encourage companies to retain profits and to invest for the benefit of the economy. In fact, the effect of their action on investment allowances is to strike a blow at some of the biggest and most progressive companies engaged in the capital intensive industries which are the spearhead of the progress of our economy. This is an argument which is right outside the theoretical prohibitions that the right hon. Gentleman has sought to impose on us.
As the Chief Secretary is a chartered accountant, and as I have also taken advice on this subject, I should like to state the theory of my position before I deal with specific figures of companies which are in this advancing and progres-

sive investment field. The right hon. Gentleman knows better than I do that the average rate of 56 per cent. which a company pays in Income Tax and Profits Tax is very much reduced in the case of a company which invests heavily, particularly in the development districts. In those cases, the rate of tax, instead of being 56 per cent. or 56¾ per cent., can be as low as 40 per cent.
A company in this situation will not get the full benefit of the reduction of the rate of tax on company profits, as the right hon. Gentleman is arguing, from 56¼ per cent. to 40 per cent., the proposed Corporation Tax rate. Instead, the reduction, when related to the book profits is from 40 per cent. to 28 per cent., being Corporation Tax at 40 per cent. applied to 70 per cent. of the book profits. The extra tax which it will pay on dividends is not affected. The consequence is that the break-even point to which the right hon. Gentleman referred as being 1.89 per cent. becomes, in the case of a company like this, as high as 3.51 per cent. This affects not merely one company but a range of the most progressive companies which are investing largely in the development districts.
May I take Courtaulds as my first example? I have the figures in relation to the magic figure of 35 per cent. Corporation Tax on which the Chief Secretary insists. The Chairman of Courtaulds has told us that, on the basis of the firm's latest accounts, its investment allowances will be reduced by £1,566,000. The right hon. Gentleman always talks about retentions increasing, but the retentions of Courtaulds will be reduced by £574,000. In this case, I have given the figure in relation to a 35 per cent. Corporation Tax. The right hon. Gentleman will agree that I am taking, from his point of view, a more conservative figure if I use a figure of 40 per cent., because this obviously reduces the differential. The figures have also been calculated for Courtaulds, in whose case the reduction on a 40 per cent. Corporation Tax would be, not as much as £1½ million, but £1,198,000. Their retentions, for reasons which the right hon. Gentleman, as a chartered accountant, will realise, would be reduced by £1,632,000.
May I take the case of Stewarts and Lloyds, whose figures I have had extracted from the latest published


accounts? Under the present system, the investment allowances are £2,179,000. They would be reduced under a Corporation Tax of 40 per cent., which in this case is a conservative figure, to £1,550,000, and their retentions, which at present are £4,744,000, would be reduced to £2,888,000.
I will not go over many other cases but I will simply take the further example of the British Motor Corporation—

Mr. Diamond: The right hon. Gentleman has not told us the rate of dividend declaration and distribution.

Mr. Lloyd: I am coming to that. I hope that the right hon. Gentleman will allow me to say that I hope that he will not anticipate my speech.
In the case of the British Motor Corporation, the present investment allowance is £1,327,000. Under a 40 per cent. Corporation Tax that would be reduced to £944,000 and the present retentions of £5,580,000 would be reduced to £4,368,000. All these figures are on the assumption that the effective rate of dividend to the shareholders is maintained.
That is the important point, because the right hon. Gentleman has all the time said that under his system the company and the taxpayer are two entirely different things and that they must not be related. In our view, this is the central fallacy of the right hon. Gentleman's position.

Mr. Diamond: The right hon. Gentleman said that he would be good enough to let me know, otherwise I should not have interrupted again, the rate of dividend—how many times covered and of what proportion of the net profit.

Mr. Lloyd: My first instance was a company whose dividend on the present basis would be 1·89 times covered and under Corporation Tax of 40 per cent. the cover would admittedly go up to 3·51. It does not, however, depend upon the actual rate of dividend, because we could follow this in separate companies and everybody knows that, with all the infinite variations, one would need a staff of chartered accountants. Every hon. Member would need to have several chartered accountants advising him.
The real point, however, is a question of principle. The right hon. Gentleman will say that under his system he is not

suggesting that the company should maintain its net effective rate of dividend to the shareholders at what it was before the tax came into operation. Very well. It might not be able to do so. It might decide that it would have to keep up its retentions and reduce its dividend. This is the point with which I want to face the right hon. Gentleman from the viewpoint of the company.
I know that the right hon. Gentleman's party is not particularly interested in shareholders, but in our view shareholders perform a real function. One of the functions which they perform, as I showed in an earlier speech to the Committee, is that in the faster growing companies retentions alone are not sufficient to finance their rate of investment and they have to go to the market and raise more money from the shareholders. If the companies choose to try to maintain their retentions by reducing their effective rate of dividend to shareholders, nothing is more certain than that the price of the shares on the market will fall.
The right hon. Gentleman knows probably better than anyone else in this Committee that in those circumstances it is more costly for a company to raise further equity capital by going to the market, because it has to pay the going rate. Although it is in order, in fact it is not due to this particular Clause of the Finance Bill. With regard to overspill we know that some companies have already fallen from an effective yield of about 4 per cent. to an effective yield of something approaching 6 per cent. Look at the enormous increase in the ratio of what would have to be paid by the company for the extra capital that it would need in circumstances like that.
I am not suggesting that in the case that we are discussing tonight the effect would be so dramatic as that, but it would, nevertheless, be appreciable. I therefore venture to suggest that the Committee should not listen to these specious, symmetrical, ingrowing accountancy arguments of the right hon. Gentleman, because they do not deal with the practical life of business and the market place in which industry has to live, and that these measures, particularly in relation to companies investing very fast in the most modern machinery, and particularly in the development districts, will harm them when they want to get the


necessary extra capital to increase their operations. In any case, it is the fact that while the Government are injuring these companies, which are some of the most valuable and important pace-setting companies in the country, and while they are talking about some alternative, they have reduced an encouragement and have so far put nothing whatever in its place.

Sir D. Glover: I cannot congratulate the Chief Secretary, although I would like to do so on a personal basis, because I do not think that he has had a very good day since he has been raised to his high position as a right hon. Gentleman. My right hon. Friend the Member for Sutton Coldfield (Mr. Geoffrey Lloyd) ripped the right hon. Gentleman's speech to ribbons. He tore all his arguments to pieces, using the examples of Courtaulds, B.M.C., Stewart and Lloyds, and other forward-looking progressive companies with which we are dealing in these Amendments.
Of course, other factors apart from investment allowances influence a company's investment policy, but there must be a point in time, and a point when the balance shifts to its disadvantage and makes it less keen on investment than we on this side of the Committee want it to be. Nothing that the right hon. Gentleman has said, and nothing that anyone on the benches opposite has said today, has removed the real truth of this Finance Bill, and that is that it is a disincentive to investment, and not an increase in the incentives which we all want to provide.
The hon. Member for Ashton-under-Lyne (Mr. Sheldon) talked about these incentives being more selective. It is easy enough, during the Committee stage of a Bill, to talk about investment allowances being more selective. Who is to decide which companies should get these allowances? Some hours ago the hon. Gentleman talked about it being a good thing to invest in computers but perhaps a bad thing to invest in one-armed bandits.
I am sure that if there was a debate in this House about providing incentives to individual firms, or to individual types of industry, nobody would speak in favour of the one-armed bandit, but it is quite likely that the firm making one-armed bandits has a far better export perform-

ance than the firm making computers. This is where the difficulty lies. It lies in trying to bring in these direct incentives to individual firms or individual industrialists in any investment allowance field.
9.30 p.m.
All the arguments that we have heard today, especially from the right hon. Gentleman, have been based on calculations which have entirely ignored dividends. As my right hon. Friend has made clear, this is not a case of meeting a countryman and asking him the way, and of his saying, "I would not have started from here". But that is exactly the way in which the Government are approaching the problem. We are dealing with a nation which has an old-established industrial fabric and tradition. It is no use starting, as the Government appear to think they can, from square one and to building an edifice as a going concern. All these companies have reached their present positions in our national life by means of policies based on dividends paid to shareholders, and those shareholders are expecting roughly the same dividend from the same effort and success of those companies in the years ahead.
Are the Government saying that they want to see a cut in dividends? If so, they should say so forthrightly. That is the one thing that the right hon. Gentleman did not say in his reply to our long debate. That is the only way in which he can pretend that this Corporation Tax, and this reduction in the investment allowances, will be to the advantage of any company. This consideration applies particularly to larger companies, such as Courtaulds and I.C.I.
When my right hon. Friends formed the Government they brought in these allowances, which I believe have done a good job. The only complaint I make is that they could have done a better job. If there has been any fault to find with the previous Tory Government it has been that they have hidden their light under a bushel and have not made it sufficiently clear, especially to medium-sized firms, that great advantages could be gained from the various investment allowances and such other arrangements that have been in force.
Not a single speech—including that of the right hon. Gentleman—that has been


made tonight has made me believe that the Government are not vindictively hostile to the growth of British industry and commerce.
I want to quote what was said in the recent General Election by the hon. Member for Liverpool, Exchange (Mrs. Braddock), the hon. Member for Dartford (Mr. Sydney Irving), who is now a Whip, and the hon. Member for Farnworth (Mr. Thornton), who is now a Minister. They said that taxation would be used to stimulate enterprise and not to penalise it. What a hollow mockery that is, after eight months of Socialism. What a hollow, sickening mockery it is of what was said by the Prime Minister, namely, that a Labour Government would bring in special taxation incentives for progressive firms so that they would gain the benefit of their initiative and drive.
What do we find? We find that because these firms are to invest their investments will not receive the same allowances as they received in the past. What an encouragement to firms to go on investing! Does the right hon. Gentleman mean to say that £300 million worth of investment allowances—and that is his own figure—is not an incentive to industry? He is talking as though the people who man industry are not human. He has the audacity to say that £300 million is not an incentive.
Why do not the Government take it all away? If their argument means anything, it means that they do not believe in incentives at all. Why are not the Government honest in their proposals? If their argument is that investment allowances are not an incentive to investment, why not scrap the lot? Why do not they "come clean"?
The Government say that they will have a review. They are having so many reviews that Raymond's Revue Bar is now out of date. Whenever they are considering something, they come to the Dispatch Box and say, "This is rather a difficult problem and we shall have a review into all the circumstances." They are becoming even less respectable than the organisation to which I have just referred.
Let us be quite clear. The arguments put by my right hon. Friend the Member for Suit on Coldfield in a remarkable speech, swept completely away the whole case which the Govern-

ment have made today. The arguments about the shipbuilding industry, and the right hon. Gentleman knows it, are wrong. In fact, every argument put up against our Amendments today is "phoney"; it is riddled with inconsistencies. The only hon. Member who tried to make a case today was the hon. Member for Middlesbrough, West (Dr. Bray). He came here as a don and lectured the schoolboys, discovered that the schoolboys on this side of the Committee knew as much as he did, and became less assertive and realised that he was talking a lot of rubbish which we had seen through before he had finished, so he folded his tent and stole quietly away.
That was the only speech which explained what was in the Government's mind. If what the hon. Member explained is what is in the Government's mind, it makes my determination to get the Government out even more urgent than it was before.

Mr. Ian Lloyd: This debate started on a somewhat canine tack. We had Newton's dog, which is probably associated with gravity, then Diamond's dog which should properly have been called Newton's dog, but Newton's dog would probably have a tail which wagged the dog. Then we had Brown's dog, which is the dog that bites the hand that feeds it. This probably accounts for the fact that the First Secretary, when declaiming about the incomes policy in Trafalgar Square, keeps his arm in a sling, to obscure from his left hand what his official right hand is doing.
We are not concerned with such matters but with the more important points about investment allowances and, in particular, the relationship of these allowances to industries such as shipping and shipbuilding. Before I come on to this specifically I should like to mention an interesting series of observations made by the hon. Member for Middlesbrough, West (Dr. Bray). He started by saying that discounted cash flow techniques were not used by computer salesmen in this country. As chairman of a computer company who has been involved, certainly for the past 18 months to two years, in a considerable amount of thought about discounted cash flow techniques, not only in the purchase of computers but in the sale of the techniques which the computer can offer, I found this not only an


astonishing observation, but an astonishingly inaccurate one.
Secondly, there is the use of these techniques by shipping. The shipping industry today could not survive unless almost all its serious financial and economic calculations took into consideration all the way along the line the whole question of investment allowances. There is no possible alternative to that conclusion. The hon. Member for Middlesbrough, West also made the point of referring to differences in return of capital of only 3 per cent., as if 3 per cent. were a rather insignificant figure. We have already heard this afternoon that 3 per cent. represents about the return on capital of the whole shipping industry. If 3 per cent. is insignificant, how can we possibly aim at a more discriminating pattern of investment encouragement and flow in this country? Obviously, we cannot.
The Chief Secretary made the rather interesting observation that the whole of this change in the structure of taxation was designed to encourage—I hope that I have got his phrase correct—"every single company" in this country. Surely this is not what we want to encourage. We should encourage every efficient company. That is a different matter.
If one relates this to the document "Investment Appraisal" it will be seen that the efficient companies are using these techniques and that these are the companies which we should encourage. Those which do not use them should not be encouraged. Therefore, when one accepts that these techniques should be extended one immediately realises that all the general arguments of the Government fall to the ground.
I will give an example of the operation of investment allowances in the shipping industry. My hon. Friend the Member for Dorset, West (Mr. Wingfield Digby) referred to Clause 32 and, in turn, I will refer to a specific case concerning methane tankers. This must be considered in relation to the general criticism of the backwardness of the shipping industry and the praise that has been heaped on the company to which I am referring for having broken new ground in bringing British shipping into a completely new sphere of operations—something which,

by and large, the British shipowner has been seriously criticised for not doing.
What happens? We find that a company chooses carefully, in consultation with the Government, and decides to employ a technique of financing which, by and large, is anti-inflationary because it has the net effect of distributing the investment allowance in the form of lower prices—in the case I have in mind to the Gas Council and thus, indirectly, to the community. This is a perfectly and definitely anti-inflationary measure.

Mr. Diamond: I do not wish to shorten the hon. Gentleman's speech, but if he will be good enough to look up the OFFICIAL REPORT he will find that this point is covered.

Mr. Lloyd: I am well aware of what the right hon. Gentleman has said previously. I have studied his remarks in the OFFICIAL REPORT closely and I intend to refer to them.
Many shipping companies operating the same techniques have been able to offer lower freight rates as a basis of creating business. If they cannot offer lower freight rates their business falls away. I would be the first to admit—and I am sure that those who are involved in the Methane Tanker Finance business would agree—that there are certain circumstances in which, as a result of an anomaly, tax can be recovered twice. I refer to the tax that is not paid on that portion of the allowance which is not distributed and the tax that is reclaimed. But in the case of the Methane Tanker Finance company, such shareholders amount to 7 per cent. of the total holding and in such a company there is no question of any parent company being involved.
As the Chief Secretary may be aware, if the parent company method of financing had been used the net effect on the Revenue would have been exactly the same over a period of years. This was carefully calculated and it was not used because the whole operation of this company was much improved by using the perfectly legal, accepted and satisfactory method of financing which I have described.
The Chief Secretary referred to the capital of this company being a mere £20,000. Is he not aware that the


B.I.S.C.O.R. Company, which imports all the iron ore in this country, has a capital of only £100? I hope that he realises that he did not adduce a relevant argument.
I particularly wish to refer to the net effect on the method which the tanker finance organisation uses of the proposed change in the tax system. I have received a memorandum which has been prepared by the management of the company to which I am referring. I regret that the Chief Secretary has left the Chamber because, in this connection, I intend to refer to some remarks which he made and which are reported in the OFFICIAL REPORT.
The right hon. Gentleman referred to precisely this kind of company, although the Select Committee on Public Accounts made this criticism that some of the companies paid dividends to parent companies and in these cases the gross dividends used by the parent companies for claims exceeded by £32 million the total profits on which the subsidiaries had paid tax. My comment is that in relation to the methane companies this statement is totally untrue. They have no parent company, and only 7 per cent. of the shares held by them are held by companies which have no tax liability.
Their final conclusion on this point is very relevant to this discussion. They say:
This organisation was certainly organised in full accordance with the law as it then existed, and although it was realised that there were possibilities of a change in existing taxation it never occurred to these companies that it would be made without proper transitional provisions to avoid hardship. At present, the methane companies will suffer more than hardship; unless some action is taken, they will face complete and utter disaster.
This is an existing situation, and the Government have no doubt taken into consideration the effect of their proposals on this type of operation as it now exists. They have a lot of experience and information about it, but they will doubtless be aware of the impact of the balance of trade figures on the general pattern of confidence in the country, and will equally be concerned to explore, perhaps a good deal more rigorously than hitherto, new methods for improving balance of payments.
May I illustrate with a particular case, of which I have details, the precise type

of effect the Government's proposals have had on a shipping enterprise. The Grace Chemical Company of America put out to tender an operation involving a 12,000-ton anhydrous ammonia carrier. Ocean Gas Transport, an associated company of Methane Tanker Finance, decided to try to secure this business. In association with Hawthorn Leslie, it designed a highly suitable ship and, on the basis of the best possible estimates it could make, came within 7 per cent. of the winning tender.
9.45 p.m.
It did not win the contract, but what is pointed out here is that
While the threat of the Corporation Tax hangs over this subsidiary, we are quite unable to achieve the economic levels of operation which will enable us to secure this business.
The effect on the nation's finances are of more than passing interest, because if this company had been successful the country would have benefited in foreign exchange to the extent of a 100,000 dollars a month for the next 20 years. This business has been completely and totally lost, and lost for the very simple reason that the impact of a Draconian tax system has driven the proprietors of this organisation right off the position from which they could secure the business.
The Government have a very serious case to answer here. This applies to the shipping industry, but it applies very much more widely than that. It is a serious matter, and it is hitting the balance of payments. If it is allowed to be developed further it will hit the balance of payments much harder, and the case that might have the most limited justification as an internal domestic re-organisation will have no justification whatever in terms of the global context within which the economy must always be considered.

Mr. Tilney: I want to support as strongly as I can my hon. Friends the Members for Portsmouth, Langstone (Mr. Ian Lloyd) and Belfast, East (Mr. McMaster). The Chief Secretary has said that he realises that shipping ought to be encouraged. Shipping is of immense importance to the Merseyside which, despite all the other industrial developments, still relies on it very much and on commerce generally. The Chief Secretary has also said that factors other than taxation affect investment decisions,


but I would urge him to bear in mind that there is little doubt that in any likely combination of circumstances the amount of cash taken from the shipping industry by means of Corporation Tax will be increased and that, therefore, the real value of the investment allowances will be reduced.
This certainly applies to the company that I have already mentioned which, over the last 10 years, has paid £5¾ million in taxation. I hope that he will bear in mind that that particular company—I ought to declare an interest in it as a small shareholder—ordered, 12 months ago, no fewer than eight ships of specialised and expensive design. The company took full account of the impact of taxation, as the N.E.D.C. has urged industrialists to do. On any reasonable assumption the high cost of those specialised ships could have been partially offset by the benefit of investment allowance. The company deliberately chose to order six of the ships in Britain despite, I regret to say, the remarkably lower cost of ships which could be obtained abroad.
The reduction of the worth of the allowance on the payments still outstanding will add 3 or 4 per cent. to the total cost of the ships. The Chief Secretary may not think this a great deal, but he has mentioned that the total profit is only 2 per cent. on much shipping, so it is of importance. What is of greater importance is the undermining of future confidence in at least the short-term fiscal stability on which investments have to be determined.
I hope that the Chief Secretary will bear this very much in mind in whatever he does to help the shipping industry in future.

Mr. Edward M. Taylor: I had intended to make a very long speech tonight, but as the Secretary of State for Scotland, the hon. Member for Glasgow, Govan (Mr. Rankin) and the right hon. Member for Easington (Mr. Shinwell) have left the Chamber, all the incentive to making a long speech has gone.
I wish to make some brief points on the Chief Secretary's speech. He said that he was making no saving through the reduction of investment allowances. At the same time, he suggested that if he

accepted these Amendments, which are designed to take us back to the status quo, it would cost the Government £80 million. He cannot have it both ways. We are entitled to an explanation. Is industry to lose £80 million? If not, how would it cost £80 million to accept these Amendments? The basis of the right hon. Gentleman's argument was that investment allowances were not doing what they were designed to do. They were not encouraging investment or were not doing so in the right way.
This may be the attitude of the Chief Secretary, but as a Scottish hon. Member I feel very bitter that throughout the election campaign, and, in particular, in the official Labour Party document, "Signposts for the Sixties", it was claimed that the Government intended to deal with the particular problem of Scotland by increasing investment allowances in the job-hungry areas. It may be that the Government now take a different view, but it seems dishonest for this to have been put forward as the basis of policy for the development districts and areas of high unemployment.
It has been suggested by the Chief Secretary—in fact it was the only argument he put forward—that the investment allowances are not of real value to the shipping industry because it has accumulated so many credits over a very long period. This denies that it is a cyclical industry and that the whole point of the investment is to prepare for a better time which undoubtedly will be coming. Shipping is a vital industry and Britain still has the largest shipping fleet in the world, greater than that of the whole European Economic Community. On the Clyde, which is an area of high unemployment, no fewer than 100,000 depend directly or indirectly on the industry for a livelihood.
In those circumstances, I hope the right hon. Gentleman will reconsider his attitude to this very urgent matter.

Mr. Heath: We are very glad to welcome the Chancellor back to the Committee. Since he left us we have spent a very worthwhile time discussing the question of investment allowances. It has been a long debate, because a large number of industries, constituencies and regional questions have been involved. I hope that the Chief Secretary does not


think that it has been too long. We have spent five and a half hours over it. I looked up the record and found that when the present Chancellor and his hon. Friends discussed this question in 1962 they discussed together two Clauses of a very much more limited kind in which the right hon. Gentleman pressed for increases of investment allowances and discrimination in their use. That debate alone took three hours. Today we have discussed four Amendments and one new Clause together, and we have covered the whole subject of investment allowances. Therefore, I think that the Committee will feel that the debate has been fully justified.
I think that of the many interesting debates we have had on the Finance Bill this has been one in which, in a way, the most intense interest has been displayed. On the other hand, I do not think that anybody who has listened to the debate all day—I have heard almost all the speeches; indeed, my hon. Friends who have spoken in the last half-hour have been sitting here all day, like myself, without having any food—would in any way challenge the view of the right hon. Member for Easington (Mr. Shinwell) that there is a certain complexity about this subject. This was probably best displayed by the speech of the hon. Member for Middlesbrough, West (Dr. Bray) who at times moved in the spheres of higher mathematics and, indeed, the calculus. At times I felt that the hon. Gentleman was absolutely lost without a blackboard on which he could have demonstrated to the Committee the proof of his thesis.
The speech of the Chief Secretary, which had its usual lucidity, was at times complex. This justifies those who hold the view that the implications of changes such as these can be properly discussed only on a White Paper which sets them out very clearly, not as an annotation of Clauses, but as an account of the actual accountancy and technical problems involved. This is what we have lacked in the past. It is a great pity.
I should like, in what I hope will be a very brief speech from the Front Bench now, in view of the admirable speech of my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) in moving the Amendment, to emphasise what seem to me to have been the main points which have emerged in the debate.
First, it seems to me that what is happening under the Bill to investment allowances is not a policy in itself. It is not put forward as a policy. It is not put forward as the answer to the particular problems which the Chief Secretary raised and which have been emphasised in the Committee. This is an indirect result of the Corporation Tax which has been instituted for other reasons. This is what we have been debating all day.
My first submission to the Committee is that it is wrong to change a matter of this kind now without being able to put forward an alternative policy. I am trying to be fair. The Chief Secretary has not claimed that there is an alternative policy. The Chancellor did not claim that there was an alternative policy. He said in his speech on the Budget that he would consider the matter after a year. What we submit to the Committee is that it is wrong to tackle this problem in this way, in which it is an indirect result of a major change and in which no alternative policy is put in its place.
Our objective in tabling these Amendments is broadly to maintain the status quo until a new policy is settled. It may be said that the figure of 40 per cent. which we have chosen is not exactly what the figure should be. On the other hand, I suggest to the Chief Secretary that by stating 40 per cent. we have chosen the lower form of revaluation which is required. I hope that the Chief Secretary will agree with that.
The Chief Secretary said that one of the difficulties about the Amendments is that they introduce anomalies. The position he is establishing as a result of the Finance Bill produces anomalies, because the position of the individual using gaming machines remains the same. He can still claim the amount of investment allowance which he is claiming at the moment. It is the company which is subject to Corporation Tax which will be affected by these changes. So, as a result of the Bill introduced by the Chief Secretary and his colleagues, there are the very anomalies which he condemned as being brought about by our Amendments which seek to maintain the status quo. I therefore hope that the Chief Secretary will be prepared to accept that his own policy is producing just as difficult anomalies.
One of the features of this situation is that it in no way pursues the proposals put forward by the Chancellor and his right hon. Friends when they were in opposition. Above all, it does not introduce any element of discrimination in the use of investment allowances. Hon. and right hon. Members on both sides of the Committee have emphasised the need for discrimination in investment allowances and hon. Members opposite who have done their best to support the Chancellor have often said that a change in the situation is needed. The hon. Member for Heywood and Royton (Mr. Barnett) emphasised that the change must come in less than a year. I submit that we should be slightly cautious about the form of discrimination which should be adopted.
10.0 p.m.
It may well be that discrimination for areas can be nothing but beneficial but I am not so convinced about attempting discrimination for different types of machinery, plant and equipment. I judge from my experience at the Board of Trade when, because of my interest in computers, numerical control and automated control, I looked carefully into the question whether there should be discrimination for those types of machinery. But I was convinced that to other industries the modernisation of mechanical equipment is just as important as the introduction of computers and numerical control. Therefore, I did not believe finally that the case was proved for introducing a discriminatory element as to the types of machinery. It is an extremely difficult task for the Chief Secretary and his colleagues to determine how this should be done. I therefore issue my own word of caution about it.
The Chief Secretary cited a good many arguments to show that industrialists are not making full use of these investment allowances. What he was proving was not that investment allowances should be dispensed with but that there should be either a new system of dealing with them which could be better understood or that there should be better education and propaganda among industrialists so that they make full use of them. This is the conclusion of his argument and not the conclusion that one should devalue the allowances by this considerable percentage.
The right hon. Gentleman said that there was difficulty of definition of investment allowances but his solution has not dealt with this difficulty. He has given two-thirds of the present allowances to things which he objected to, among them gaming machines, ropes, and all the other examples which he quoted. The right hon. Gentleman then said that it was a complicated business, but as I intervened he said rather lightheartedly that this was a job for accountants to handle. I believe that it is. The logical conclusion of the right hon. Gentleman's argument is that all firms who have accountants capable of handling them should keep investment allowances and that all those firms who do not have such accountants should have the allowances abolished. This has only to be stated to see how ridiculous an argument it is.
I do not see therefore that any of the points which the right hon. Gentleman raised have any great impact. The marginal effect of investment allowances should be considered. There are of course other major considerations in investments, but investment allowances are a marginal consideration which influence whether or not investment takes place and therefore there is prima facie a powerful argument for their retention. This is my conclusion, stated as fairly as I can put it.
All the things which the Chief Secretary has said today have contradicted the view which he took in opposition and I find it difficult to see why there should be this sudden conversion in this way. We have always accepted the argument that investment allowances are bound to vary with changes in taxation, but the Chief Secretary has never accepted in this context that this is not just a change in taxation but a fundamental change in the form of taxation, with the consequences of the rate that goes with it. In his other moments, when he is saying that the life of the businessman from now on will be simplicity itself, and so on, he tells us that this is a fundamental change in taxation—"Look how clever we are to have thought of it and how bold we are to carry it through". But when he comes to investment allowances, he always says that this is just the same as a change of 6d. up or down in the standard rate and one must accept it in one's stride. With respect, it is not an argument worthy of the right hon. Gentleman.
The right hon. Gentleman went on to an argument about the cost, saying that it was £300 million, the saving by the Corporation Tax would be £100 million, the fringe items being £50 million. But he later said that there was no saving and no cost. I regard this as a metaphysical argument, and I think, judging by the expression on his face at the time, that the right hon. Member for Easington found it completely incomprehensible. It was a metaphysical argument which the whole Committee found the greatest difficulty in understanding. I certainly did.
The figures were given by my right hon. Friend the Member for Altrincham and Sale, with specific examples of what the results will be. We seem to be getting the worst of all possible worlds. The Chief Secretary tells us that there is no gain and no saving of any kind, yet we hear that companies, some of them large, important and powerful companies, have lost or will lose large amounts. It is a remarkable achievement. If I may say so, this is the difficulty we have been in all the way through our discussions on the Corporation Tax. Very dogmatically, the Chief Secretary said that we had a major problem, it was costing us a lot of money, but not producing the results. His right hon. Friend the Chancellor was much more cautious about it in his Budget speech. I have noticed how, during our debates, the dogmatism has grown in the statement that we are not getting the results and it is costing us a lot of money.
The Chief Secretary said that the Government were introducing the Corporation Tax and would find another method. These were the two points he gave as their policy. But, of course, to return to my previous point, saying that we have got the Corporation Tax is no answer in an existing industrial structure. In an existing industrial structure in which there are existing dividend rates, the relation to the market and everything else, one cannot make the kind of broad assumption across the whole field which the right hon. Gentleman makes that companies will have so much more money to play about with and, therefore, to invest if they choose, so that we can adept the indirect consequence of the reduction of investment allowances. In fact, one can show that, in many companies, if one is to be able to compensate,

there will have to be quite substantially reduced dividends. It is generally agreed now that companies will not, in fact, decide to reduce dividends, because of the existing structure, but they will reduce investment. But this is exactly the reverse of what the right hon. Gentleman says he is trying to do—we accept his motives, of course—what we on this side want to do, and what, in the light of the trade figures today, everyone ought to be absolutely determined to do.
But what one cannot put into the Chief Secretary's mind is that, when companies have to make these decisions in existing industrial structure, this is the way decisions are likely to go, as was demonstrated absolutely clearly by my right hon. Friend the Member for Altrincham and Sale. If only the Chief Secretary will recognise that there is this danger, the Committee will feel rather happier about his approach to the whole matter.
The right hon. Gentleman said that the Government would find an alternative policy. This was emphasised by his hon. Friend the Member for Middlesbrough, West, who, I am sorry to see, is not in his place at the moment. We all respect the hon. Gentleman for his great intelligence and for the attention he gives to these matters. As we know, he was associated with I.C.I., one of the greatest companies, and he had a certain responsibility for its investment decisions. It is interesting that the Chairman of I.C.I. has flatly contradicted the thesis of the hon. Member for Middlesbrough, West, saying that he does not accept his view. He said:
In spite of what has been said about business men ignoring taxation in their investment decisions I am sure that large companies do take taxation into account. We certainly do. I also believe that the number of companies who do so is growing rapidly".
Then the Chairman went on to details.
It seems to me that the argument of the hon. Member for Middlesbrough, West, for a large part of the time did not hold water. He said that what we need is an immediate incentive—an incentive which makes an immediate impact on a firm—if we are to get investment. But his thesis was that firms must look at the life of the investment over a 15-year period, if necessary, the discounted cash flow and the other things associated with it. That is the lesson


of the N.E.D.C. pamphlet and in that the hon. Gentleman is right. But one cannot, in my view at any rate combine these two things. The important thing is to get education of business and industry into the way suggested by the N.E.D.C.
From the industrial point of view, the impact on industry of the Government's proposal can be bad because, first, it has to plan some way ahead and at the moment is in a state of uncertainty about what is to happen in the long term from the Chancellor's investigations. All it sees is that investment allowances are being considerably devalued and it does not know what is to happen in future. This will, therefore, affect industry adversely.
I believe that the development districts will also suffer. The view of Mr. Chetwynd has been quoted by my hon. Friend the Member for Tynemouth (Dame Irene Ward). In Scotland the Government proposal will have some deleterious effect on industrial investment. It is not enough to keep the same proportion between investment in development districts and the rest of the country. It is necessary also to have an absolute degree of incentive to people to invest. It is not sufficient to say that the relationship between development districts and the rest of the country will still apply to the advantage of development districts. One has first to have an absolute amount of incentive or people will not invest. That is the marginal factor. It was my experience in dealing with individual firms. Certainly, the development districts will suffer and that is undesirable.
The right hon. Member for Easington speaks with great experience of the shipping industry and he emphasised the harm which flag discrimination has done and our desire that this should be handled effectively. The fact is that all Governments since the war have been unable to handle it effectively. Indeed, that applies to any Government in any country as far as I know. The right hon. Gentleman mentioned the action of the

U.S. Maritime Commission. He will agree that the last British Government did bring about a change of view there, although it was not concerned with flag discrimination. If we cannot help the industry through flag discrimination controlled throughout the world then we can at least help it through investment allowances. I accept the Chief Secretary's overall figure about the amount of credit building up but it does not help individual firms much which can and do benefit from allowances, and surely encouragement of individual firms is what we want to bring about through their investment decisions.
Finally, there is the question of the advice that the Chief Secretary has received about the attitude of firms. Earlier, the Chancellor quoted the advice given to the N.E.D.C. What is the view of the N.E.D.C. itself now about investment allowances? Does it believe that they should be devalued? Of course, neither the Chancellor nor the Chief Secretary can answer that question because they are not allowed to be members of the N.E.D.C., but I understand that the very recent view of the N.E.D.C. is that it does not want the investment allowances to suffer in this way. I believe that to be a right judgment. It is not desirable that this change should be brought about in the investment allowances when there is no alternative policy to put in its place.
Even if we accept all the objections put forward by the Chief Secretary, which we do not—and I have tried to point out why we do not accept some and why his arguments would apply as much to his own policy—that would not justify bringing about a change of this importance—£300 million overall and a saving of £100 million—as an indirect process of taxation change without being able to apply an alternative policy in its place.
I submit to the Committee that the Amendments and the new Clause which we have been discussing all day are a justifiable attempt to restore the status quo and I strongly urge the Committee to support it.

Question put, That the proposed words be there inserted:—

The Committee divided: Ayes 189, Noes 194.

Division No. 172.]
AYES
[10.16 p.m.


Agnew, Commander Sir Peter
Goodhew, Victor
Morrison, Charles (Devizes)


Anstruther-Gray, Rt. Hn. Sir W.
Gower, Raymond
Munro-Lucas-Tooth, Sir Hugh


Astor, John
Grant, Anthony
Murton, Oscar


Atkins, Humphrey
Gresham Cooke, R.
Noble, Rt. Hn. Michael


Awdry, Daniel
Griffiths, Peter (Smethwick)
Nugent, Rt. Hn. Sir Richard


Baker, W. H. K.
Grimond, Rt. Hn. J.
Onslow, Cranley


Barber, Rt. Hn. Anthony
Gurden, Harold
Orr-Ewing, Sir Ian


Barlow, Sir John
Hall, John (Wycombe)
Page, John (Harrow, W.)


Batsford, Brian
Hall-Davis, A. G. F.
Page, R. Graham (Crosby)


Bell, Ronald
Hamilton, M. (Salisbury)
Pearson, Sir Frank (Clitheroe)


Bennett, Sir Frederic (Torquay)
Harris, Reader (Heston)
Peel, John


Berry, Hn. Anthony
Harrison, Brian (Maldon)
Percival, Ian


Bessell, Peter
Harrison, Col. Sir Harwood (Eye)
Peyton, John


Biffen, John
Harvey, Sir Arthur Vere (Macclesf'd)
Pickthorn, Rt. Hn. Sir Kenneth


Biggs-Davison, John
Harvey, John (Walthamstow, E.)
Pitt, Dame Edith


Bingham, R. M.
Hawkins, Paul
Powell, Rt. Hn. J. Enoch


Birch, Rt. Hn. Nigel
Heald, Rt. Hn. Sir Lionel
Price, David (Eastleigh)


Black, Sir Cyril
Heath, Rt. Hn. Edward
Prior, J. M. L.


Bowen, Roderic (Cardigan)
Higgins, Terence L.
Rawlinson, Rt. Hn. Sir Peter


Box, Donald
Hiley, Joseph
Redmayne, Rt. Hn. Sir Martin


Boyd-Carpenter, Rt. Hn. J.
Hill, J. E. B. (S. Norfolk)
Ridley, Hn Nicholas


Boyle, Rt. Hn. Sir Edward
Hobson, Rt. Hn. Sir John
Ridsdale, Julian


Brewis, John
Hooson, H. E.
Roberts, Sir Peter (Heeley)


Brinton, Sir Tatton
Hordern, Peter
Rodgers, Sir John (Sevenoaks)


Bromley-Davenport,Lt.-Col. Sir Walter
Hornsby-Smith, Rt. Hn. Dame P.
Shepherd, William


Brown, Sir Edward (Bath)
Hunt, John (Bromley)
Sinclair, Sir George


Bruce-Gardyne, J.
Hutchison, Michael Clark
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Bryan, Paul
Iremonger, T. L.
Spearman, Sir Alexander


Bullus, Sir Eric
Irvine, Bryant Codman (Rye)
Stainton, Keith


Campbell, Gordon
Jenkin, Patrick (Woodford)
Steel, David (Roxburgh)


Carlisle, Mark
Johnston, Russell (Inverness)
Studholme, Sir Henry


Carr, Rt. Hn. Robert
Jopling, Michael
Talbot, John E.


Cary, Sir Robert
Joseph, Rt. Hn. Sir Keith
Taylor, Sir Charles (Eastbourne)


Chataway, Christopher
Kaberry, Sir Donald
Taylor, Edward M. (G'gow,Cathcart)


Chichester-Clark, R.
Kerby, Capt. Henry
Taylor, Frank (Moss Side)


Clark, Henry (Antrim, N.)
Kershaw, Anthony
Temple, John M.


Clark, William (Nottingham, S.)
Kimball, Marcus
Thompson, Sir Richard (Croydon, S.)


Cole, Norman
King, Evelyn (Dorset, S.)
Thorpe, Jeremy


Cooke, Robert
Kirk, Peter
Tiley, Arthur (Bradford, W.)


Cooper, A. E.
Lambton, Viscount
Tilney, John (Wavertree)


Costain, A. P.
Lancaster, Col. C. G.
Turton, Rt. Hn. R. H.


Crawley, Aidan
Legge-Bourke, Sir Harry
Tweedsmuir, Lady


Crosthwaite-Eyre, Col. Sir Oliver
Lewis, Kenneth (Rutland)
van straubenzee, W. R.


Curran, Charles
Litchfield, Capt. John
Vaughan-Morgan, Rt. Hn. Sir John


Currie, G. B. H.
Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfield)
Vickers, Dame Joan


Dalkeith, Earl of
Lloyd, Ian (P'tsm'th, Langstone)
Walder, David (High Peak)


Davies, Dr. Wyndham (Perry Barr)
Longbottom, Charles
Walker, Peter (Worcester)


Dean, Paul
Lubbock, Eric
Walters, Dennis


Deedes, Rt. Hn. W. F.
McAdden, Sir Stephen
Ward, Dame Irene


Digby, Simon Wingfield
Mackie, George Y. (C'ness &amp; S'land)
Webster, David


Dodds-Parker, Douglas
McLaren, Martin
Wells, John (Maidstone)


Elliot, Capt. Walter (Carshalton)
Maclean, Sir Fitzroy
Whitelaw, William


Elliott, R. W.(N'c'tle-upon-Tyne,N.)
Maginnis, John E.
Williams, Sir Rolf Dudley (Exeter)


Emery, Peter
Marten, Nell
Wills, Sir Gerald (Bridgwater)


Errington, Sir Eric
Mathew, Robert
Wilson, Geoffrey (Truro)


Eyre, Reginald
Maude, Angus
Wise, A. R.


Fisher, Nigel
Maxwell-Hyslop, R. J.
Wolrige-Gordon, Patrick


Fletcher-Cooke, Charles (Darwen)
Maydon, Lt.-Cmdr. S. L. C.
Wood, Rt. Hn. Richard


Fletcher-Cooke, Sir John (S'pton)
Meyer, Sir Anthony
Wylie, N. R.


Fraser, Ian (Plymouth, Sutton)
Mills, Peter (Torrington)
Yates, William (The Wrekin)


Gardner, Edward
Miscampbell, Norman
Younger, Hn. George


Gibson-Watt, David
Mitchell, David



Gilmour, sir John (East Fife)
Monro, Hector
TELLERS FOR THE AYES:


Glover, Sir Douglas
More, Jasper
Mr. MacArthur and Mr. Pym.




NOES


Abse, Leo
Bellenger, Rt. Hn. F. J.
Brown, Hugh D. (Glasgow, Provan)


Allaun, Frank (Salford, E.)
Bennett, J. (Glasgow, Bridgeton)
Brown, R. W. (Shoreditch &amp; Fbury)


Alldritt, Walter
Blackburn, F.
Buchan, Norman (Renfrewshire. W.)


Allen, Scholefield (Crewe)
Blenkinsop, Arthur
Buchanan, Richard


Atkinson, Norman
Boardman, H.
Callaghan, Rt. Hn. James


Bacon, Miss Alice
Bowden, Rt. Hn. H. W. (Leics S.W.)
Carmichael, Neil


Bagier, Gordon A. T.
Boyden, James
Carter-Jones, Lewis


Barnett, Joel
Braddock, Mrs. E. M.
Castle, Rt. Hn. Barbara


Baxter, William
Bray, Dr. Jeremy
Chapman, Donald


Beaney, Alan
Brown, Rt. Hn. George (Belper)
Conlan, Bernard




Cousins, Rt. Hn. Frank
Jeger, George (Goole)
Pursey, Cmdr. Harry


Craddock, George (Bradford, S.)
Jenkins, Rt. Hn. Roy (Stechford)
Randall, Harry


Crawshaw, Richard
Johnson, James (K'ston-on-Hull,W.)
Rankin, John


Crossman, Rt. Hn. R. H. S.
Jones, Dan (Bumley)
Rees, Merlyn


Cullen, Mrs. Alice
Jones, J. Idwal (Wrexham)
Rhodes, Geoffrey


Dalyell, Tam
Jones, T. W. (Merioneth)
Roberts, Goronwy (Caernarvon)


Darling, George
Kenyon, Clifford
Robertson, John (Paisley)


Davies, C. Elfed (Rhondda, E.)
Kerr, Mrs. Anne (R'ter &amp; Chatham)
Robinson, Rt. Hn.K.(St. Pancras,N.)


Davies, Harold (Leek)
Lawson, George
Rodgers, William (Stockton)


Davies, Ifor (Gower)
Leadbitter, Ted
Rogers, George (Kensington, N.)


Davies, S. O. (Merthyr)
Lee, Miss Jennie (Cannock)
Rose, Paul B.


de Freitas, Sir Geoffrey
Lomas, Kenneth
Rowland, Christopher


Delargy, Hugh
McBride, Neil
Shore, Peter (Stepney)


Diamond, John
McCann, J.
Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)


Doig, Peter
MacColl, James
Short, Mrs. Renee (W'hampton,N.E.)


Donnelly, Desmond
MacDermot, Niall
Silkin, S. C. (Camberwell, Dulwich)


Driberg, Tom
McKay, Mrs. Margaret
Silverman, Sydney (Nelson)


Duffy, Dr. A. E. P.
Mackenzie, Gregor (Rutherglen)
Slater, Mrs. Harriet (Stoke, N.)


Dunn, James A.
MacMillan, Malcolm
Slater, Joseph (Sedgefield)


Edwards, Rt. Hn. Ness (Caerphilly)
Marion, Peter (Preston, S.)
Small, William


Ennals, David
Mahon, Simon (Bootle)
Snow, Julian


Ensor, David
Mallalieu,J.P.W.(Huddersfield,E.)
Stewart, Rt. Hn. Michael


Evans, loan (Birmingham, Yardley)
Manuel, Archie
Stonehouse, John


Fernyhough, E.
Mapp, Charles
Stones, William


Finch, Harold (Bedwellty)
Marsh, Richard
Summerskill, Hn. Dr. Shirley


Fletcher, Sir Eric (Islington, E.)
Maxwell, Robert
Swain, Thomas


Fletcher, Ted (Darlington)
Millan, Bruce
Swingler, Stephen


Fletcher, Raymond (Ilkeston)
Miller, Dr. M. S.
Symonds, J. B.


Foot, Sir Dingle (Ipswich)
Milne, Edward (Blyth)
Taverne, Dick


Ford, Ben
Molloy, William
Taylor, Bernard (Mansfield)


Fraser, Rt. Hn. Tom (Hamilton)
Monslow, Walter
Thomas, George (Cardiff, W.)


Galpern, Sir Myer
Morris, Alfred (Wythenshawe)
Thomas, lorwerth (Rhondda, W.)


Garrett, W. E.
Morris, Charles (Openshaw)
Thornton, Ernest


Garrow, A.
Morris, John (Aberavon)
Tinn, James


Ginsburg, David
Newens, Stan
Tomney, Frank


Gourlay, Harry
Noel-Baker,Rt.Hn.Philip(Derby,S.)
Urwin, T. W.


Greenwood, Rt. Hn. Anthony
Norwood, Christopher
Varley, Eric G.


Gregory, Arnold
Oakes, Gordon
Wainwright, Edwin


Grey, Charles
Ogden, Eric
Walden, Brian (All Saints)


Griffiths, David (Rother Valley)
O'Malley, Brian
Walker, Harold (Doncaster)


Hamilton, James (Bothwell)
Oram, Albert E. (E. Ham, S.)
Wallace, George


Hamilton, William (West Fife)
Orme, Stanley
Warbey, William


Hannan, William
Oswald, Thomas
Watkins, Tudor


Harper, Joseph
Owen, Will
White, Mrs. Eirene


Harrison, Walter (Wakefield)
Padley, Walter
Whitlock, William


Hart, Mrs. Judith
Page, Derek (King's Lynn)
Wigg, Rt. Hn. George


Hattersley, Roy
Paget, R. T.
Willey, Rt. Hn. Frederick


Hazell, Bert
Palmer, Arthur
Williams, Alan (Swansea, W.)


Holman, Percy
Park, Trevor (Derbyshire, S.E.)
Williams, Albert (Abertillery)


Homer, John
Pavitt, Laurence
Willis, George (Edinburgh, E.)


Howarth, Harry (Wellingborough)
Pearson, Arthur (Pontypridd)
Wilson, William (Coventry, S.)


Howell, Denis (Small Heath)
Pentland, Norman
Winterbottom, R. E.


Hoy, James
Perry, Ernest G.



Irving, Sydney (Dartford)
Popplewell, Ernest
TELLERS FOR THE NOES:


Jackson, Colin
Price, J. T. (Westhoughton)
Mr. Howie and Mi. Fitch.


Jay, Rt. Hn. Douglas
Probert, Arthur

Amendment proposed: In page 63, line 25, at end insert:
Provided always that the expenditure incurred in the provision of new machinery or plant for use in a development district in respect of which investment allowances are calculated shall for the purpose of corporation

tax be deemed to be increased by 40 per cent. —[Mr. Heath.]

Question put, That those words be there inserted:—

The Committee divided: Ayes 189, Noes 195.

Division No. 173.]
AYES
[10.27 p.m.


Agnew, Commander Sir Peter
Goodhew, Victor
Morrison, Charles (Devizes)


Anstruther-Gray, Rt. Hn. Sir W.
Gower, Raymond
Munro-Lucas-Tooth, Sir Hugh


Astor, John
Grant, Anthony
Murton, Oscar


Atkins, Humphrey
Gresham Cooke, R.
Noble, Rt. Hn. Michael


Awdry, Daniel
Griffiths, Peter (Smethwick)
Nugent, Rt. Hn. Sir Richard


Baker, W. H. K.
Grimond, Rt. Hn. J.
Onslow, Cranley


Barber, Rt. Hn. Anthony
Gurden, Harold
Orr-Ewing, Sir Ian


Barlow, Sir John
Hall, John (Wycombe)
Page, John (Harrow, W.)


Batsford, Brian
Hall-Davis, A. G. F.
Page, R. Graham (Crosby)


Bell, Ronald
Hamilton, M. (Salisbury)
Pearson, Sir Frank (Clitheroe)


Bennett, Sir Frederic (Torquay)
Harris, Reader (Heston)
Peel, John


Berry, Hn. Anthony
Harrison, Brian (Maldon)
Percival, Ian


Bessell, Peter
Harrison, Col. Sir Harwood (Eye)
Peyton, John


Bitten, John
Harvey, Sir Arthur Vere (Macclesf'd)
Pickthorn, Rt. Hn. Sir Kenneth


Biggs-Davison, John
Harvey, John (Walthamstow, E.)
Pitt, Dame Edith


Bingham, R. M.
Hawkins, Paul
Powell, Rt. Hn. J. Enoch


Birch, Rt. Hn. Nigel
Heald, Rt. Hn. Sir Lionel
Price, David (Eastleigh)


Black, Sir Cyril
Heath, Rt. Hn. Edward
Prior, J. M. L.


Bowen, Roderic (Cardigan)
Higgins, Terence L.
Rawlinson, Rt. Hn. Sir Peter


Box, Donald
Hiley, Joseph
Redmayne, Rt. Hn. Sir Martin


Boyd-Carpenter, Rt. Hn. J.
Hill, J. E. B. (S. Norfolk)
Ridley, Hn. Nicholas


Boyle, Rt. Hn. Sir Edward
Hobson, Rt. Hn. Sir John
Ridsdale, Julian


Brewis, John
Hooson, H. E.
Roberts, Sir Peter (Heeley)


Brinton, Sir Tatton
Hordern, Peter
Rodgers, Sir John (Sevenoaks)


Bromley-Davenport,Lt.-Col.Sir Walter
Hornsby-Smith, Rt. Hn. Dame P.
Shepherd, William


Brown, Sir Edward (Bath)
Hunt, John (Bromley)
Sinclair, Sir George


Bruce-Gardyne, J.
Hutchison, Michael Clark
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Bryan, Paul
Iremonger, T. L.
Spearman, Sir Alexander


Bullus, Sir Eric
Irvine, Bryant Godman (Rye)
Stainton, Keith


Campbell, Gordon
Jenkin, Patrick (Woodford)
Steel, David (Roxburgh)


Carlisle, Mark
Johnston, Russell (Inverness)
Studholme, Sir Henry


Carr, Rt. Hn. Robert
Jopling, Michael
Talbot, John E.


Cary, Sir Robert
Joseph, Rt. Hn. Sir Keith
Taylor, Sir Charles (Eastbourne)


Chataway, Christopher
Kaberry, Sir Donald
Taylor, Edward M. (G'gow,Cathcart)


Chichester-Clark, R.
Kerby, Capt. Henry
Taylor, Frank (Moss Side)


Clark, Henry (Antrim, N.)
Kershaw, Anthony
Temple, John M.


Clark, William (Nottingham, S.)
Kimball, Marcus
Thompson, Sir Richard (Croydon, S.)


Cole, Norman
King, Evelyn (Dorset, S.)
Thorpe, Jeremy


Cooke, Robert
Kirk, Peter
Tiley, Arthur (Bradford, W.)


Cooper, A. E.
Lambton, Viscount
Tilney, John (Wavertree)


Costain, A. P.
Lancaster, Col. C. G.
Turton, Rt. Hn. R. H.


Crawley, Aidan
Legge-Bourke, Sir Harry
Tweedsmuir, Lady


Crosthwalte-Eyre, Col. Sir Oliver
Lewis, Kenneth (Rutland)
van Straubenzee, W. R.


Curran, Charles
Litchfield, Capt. John
Vaughan-Morgan, Rt. Hn. Sir John


Currie, G. B. H.
Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfield)
Vickers, Dame Joan


Dalkeith, Earl of
Lloyd, Ian (P'tsm'th, Langstone)
Walder, David (High Peak)


Davies, Dr. Wyndham (Perry Barr)
Longbottom, Charles
Walker, Peter (Worcester)


Dean, Paul
Lubbock, Eric
Walters, Dennis


Deedes, Rt. Hn. W. F.
McAdden, Sir Stephen
Ward, Dame Irene


Digby, Simon Wingfield
Mackie, George V. (C'ness &amp; S'land)
Webster, David


Dodds-Parker, Douglas
McLaren, Martin
Wells, John (Maidstone)


Elliot, Capt. Walter (Carshalton)
Maclean, Sir Fitzroy
Whitelaw, William


Elliott, R. W.(N'c'tle-upon-Tyne,N.)
Maginnis, John E.
Williams, Sir Rolf Dudley (Exeter)


Emery, Peter
Marten, Nell
Wills, Sir Gerald (Bridgwater)


Errington, Sir Eric
Mathew, Robert
Wilson, Geoffrey (Truro)


Eyre, Reginald
Maude, Angus
Wise, A. R.


Fisher, Nigel
Maxwell-Hyslop, R. J.
Wolrige-Gordon, Patrick


Fletcher-Cooke, Charles (Darwen)
Maydon, Lt.-Cmdr. S. L. C.
Wood, Rt. Hn. Richard


Fletcher-Cooke, Sir John (S'pton)
Meyer, Sir Anthony
Wylie, N. R.


Fraser, Ian (Plymouth, Sutton)
Mills, Peter (Torrington)
Yates, William (The Wrekin)


Gardner, Edward
Miscampbell, Norman
Younger, Hn. George


Gibson-Watt, David
Mitchell, David



Gilmour, Sir John (East Fife)
Monro, Hector
TELLERS FOR THE AYES:


Glover, Sir Douglas
More, Jasper
Mr. Ian Mac Arthur and




Mr. Francis Pym.




NOES


Abse, Leo
Allen, Scholefield (Crewe)
Bagier, Gordon A. T.


Allaun, Frank (Salford, E.)
Atkinson, Norman
Barnett, Joel


Alldritt, Walter
Bacon, Mist Alice
Baxter, William




Beaney, Alan
Hannan, William
Park, Trevor (Derbyshire, S.E.)


Bellenger, Rt. Hn. F. J.
Harper, Joseph
Pavitt, Laurence


Bennett, J. (Glasgow, Bridgeton)
Harrison, Walter (Wakefield)
Pearson, Arthur (Pontypridd)


Blackburn, F.
Hart, Mrs. Judith
Pentland, Norman


Blenkinsop, Arthur
Hattersley, Roy
Perry, Ernest G.


Boardman, H.
Hazell, Bert
Popplewell, Ernest


Bowden, Rt. Hn. H. W. (Leics S.W.)
Holman, Percy
Price, J. T. (Westhoughton)


Boy den, James
Horner, John
Probert, Arthur


Braddock, Mrs. E. M.
Houghton, Rt. Hn. Douglas
Pursey, Cmdr. Harry


Bray, Dr. Jeremy
Howarth, Harry (Wellingborough)
Randall, Harry


Brown, Rt. Hn. George (Belper)
Howell, Denis (Small Heath)
Rankin, John


Brown, Hugh D. (Glasgow, Provan)
Hoy, James
Rees, Merlyn


Brown, R. W. (Shoreditch &amp; Fbury)
Irving, Sydney (Dartford)
Rhodes, Geoffrey


Buchan, Norman (Renfrewshire, W.)
Jackson, Colin
Roberts, Goronwy (Caernarvon)


Buchanan, Richard
Jay, Rt. Hn. Douglas
Robertson, John (Paisley)


Callaghan, Rt. Hn. James
Jeger, George (Goole)
Robinson, Rt. Hn.K.(St. Pancras,N.)


Carmichael, Neil
Jenkins, Rt. Hn. Roy (Stechford)
Rodgers, William (Stockton)


Carter-Jones, Lewis
Johnson, James(K'ston-on-Hull,W.)
Rogers, George (Kensington, N.)


Castle, Rt. Hn. Barbara
Jones, Dan (Burnley)
Rose, Paul B.


Chapman, Donald
Jones, J. Idwal (Wrexham)
Rowland, Christopher


Conlan, Bernard
Jones, T. W. (Merioneth)
Shore, Peter (Stepney)


Cousins, Rt. Hn. Frank
Kenyon, Clifford
Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)


Craddock, George (Bradford, S.)
Kerr, Mrs. Anne (R'ter &amp; Chatham)
Short, Mrs. Renée (W'hampton,N.E.)


Crawshaw, Richard
Lawson, George
Silkin, S. C. (Camberwell, Dulwich)


Crossman, Rt. Hn. R. H. S.
Leadbitter, Ted
Silverman, Sydney (Nelson)


Cullen, Mrs. Alice
Lee, Miss Jennie (Cannock)
Slater, Mrs. Harriet (Stoke, N.)


Dalyell, Tam
Lomas, Kenneth
Slater, Joseph (Sedgefield)


Darling, George
McBride, Neil
Small, William


Davies, G. Elfed (Rhondda, E.)
McCann, J.
Snow, Julian


Davies, Harold (Leek)
MacColl, James
Stewart, Rt. Hn. Michael


Davies, Ifor (Gower)
MacDermot, Niall
Stonehouse, John


Davies, S. O. (Merthyr)
McKay, Mrs. Margaret
Stones, William


de Freitas, Sir Geoffrey
Mackenzie, Gregor (Rutherglen)
Summerskill, Hn. Dr. Shirley


Delargy, Hugh
MacMillan, Malcolm
Swain, Thomas


Diamond, John
Mahon, Peter (Preston, S.)
Swingler, Stephen


Doig, Peter
Mahon, Simon (Bootle)
Symonds, J. B.


Donnelly, Desmond
Mallalieu,J.P.W.(Huddersfield,E.)
Taverne, Dick


Driberg, Tom
Manuel, Archie
Taylor, Bernard (Mansfield)


Duffy, Dr. A. E. P.
Mapp, Charles
Thomas, George (Cardiff, W.)


Dunn, James A.
Marsh, Richard
Thomas, Iorwerth (Rhondda, W.)


Edwards, Rt. Hn. Ness (Caerphilly)
Maxwell, Robert
Thornton, Ernest


Ennals, David
Millan, Bruce
Tinn, James


Eneor, David
Miller, Dr. M. S.
Tomney, Frank


Evans, Ioan (Birmingham, Yardley)
Milne, Edward (Blyth)
Urwin, T. W.


Fernyhough, E.
Molloy, William
Varley, Eric G.


Finch, Harold (Bedwellty)
Monslow, Walter
Wainwright, Edwin


Fletcher, Sir Eric (Islington, E.)
Morris, Alfred (Wythenshawe)
Walden, Brian (All Saints)


Fletcher, Ted (Darlington)
Morris, Charles (Openshaw)
Walker, Harold (Doncaster)


Fletcher, Raymond (Ilkeston)
Morris, John (Aberavon)
Wallace, George


Foot, Sir Dingle (Ipswich)
Newens, Stan
Warbey, William


Ford, Ben
Noel-Baker, Rt.Hn.Phllip(Derby,S.)
Watkins, Tudor


Fraser, Rt. Hn. Tom (Hamilton)
Norwood, Christopher
White, Mrs. Eirene


Galpern, Sir Myer
Oakes, Gordon
Whitlock, William


Garrett, W. E.
Ogden, Eric
Wigg, Rt. Hn. George


Garrow, A.
O'Malley, Brian
Willey, Rt. Hn. Frederick


Ginsburg, David
Oram, Albert E. (E. Ham, S.)
Williams, Alan (Swansea, W.)


Gourlay, Harry
Orme, Stanley
Williams, Albert (Abertillery)


Greenwood, Rt. Hn. Anthony
Oswald, Thomas
Willis, George (Edinburgh, E.)


Gregory, Arnold
Owen, Will
Wilson, William (Coventry, S.)


Grey, Charles
Padley, Walter
Winterbottom, R. E.


Griffiths, David (Rother Valley)
Page, Derek (King's Lynn)



Hamilton, James (Bothwell)
Paget, R. T.
TELLERS FOR THE NOES:


Hamilton, William (West Fife)
Palmer, Arthur
Mr. W. Howie and Mr. Alan Fitch.

Amendment proposed: In page 63, line 25, at end insert:
Provided always that the expenditure on the provision of ships in respect of which investment allowances are calculated shall for the purpose of corporation tax be deemed to be increased by 40 per cent.—[Mr. Heath.]

Question put, That those words be there inserted:

The Committee divided: Ayes 190, Noes 196.

Division No. 174.]
AYES
[10.37 p.m.


Agnew, Commander Sir Peter
Barlow, Sir John
Biggs-Davison, John


Anstruther-Gray, Rt. Hn. Sir W.
Batsford, Brian
Bingham, R. M.


Astor, John
Bell, Ronald
Birch, Rt. Hn. Nigel


Atkins, Humphrey
Bennett, Sir Frederic (Torquay)
Black, Sir Cyril


Awdry, Daniel
Berry, Hn. Anthony
Bowen, Roderic (Cardigan)


Baker, W. H. K.
Bessell, Peter
Box, Donald


Barber, Rt. Hn. Anthony
Biffen, John
Boyd-Carpenter, Rt. Hn. J.




Boyle, Rt. Hit. Sir Edward
Heald, Rt. Hn. Sir Lionel
Pearson, Sir Frank (Clitheroe)


Brewis, John
Heath, Rt. Hn. Edward
Peel, John


Brinton, Sir Tatton
Higgins, Terence L.
Percival, Ian


Bromley-Davenport,Lt.-Col.SirWalter
Hiley, Joseph
Peyton, John


Brown, Sir Edward (Bath)
Hill, J. E. B. (S. Norfolk)
Pickthorn, Rt. Hn. Sir Kenneth


Bruce-Gardyne, J.
Hobson, Rt. Hn. Sir John
Pitt, Dame Edith


Bryan, Paul
Hooson, H. E.
Powell, Rt. Hn. J. Enoch


Bullus, Sir Eric
Hordern, Pater
Price, David (Eastleigh)


Campbell, Gordon
Hornby, Richard
Prior, J. M. L.


Carlisle, Mark
Hornsby-Smith, Rt. Hn. Dame P.
Pym, Francis


Carr, Rt. Hn. Robert
Hunt, John (Bromley)
Rawlinson, Rt. Hn. Sir Peter


Cary, Sir Robert
Hutchison, Michael Clark
Redmayne, Rt. Hn. Sir Martin


Chataway, Christopher
Iremonger, T. L.
Ridley, Hn. Nicholas


Chichester-Clark, R.
Irvine, Bryant Godman (Rye)
Ridsdale, Julian


Clark, Henry (Antrim, N.)
Jenkin, Patrick (Woodford)
Roberts, Sir Peter (Heeley)


Clark, William (Nottingham, S.)
Johnston, Russell (Inverness)
Rodgers, Sir John (Sevenoaks)


Cole, Norman
Jopling, Michael
Shepherd, William


Cooke, Robert
Joseph, Rt. Hn. Sir Keith
Sinclair, Sir George


Cooper, A. E.
Kaberry, Sir Donald
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Costain, A. P.
Kerby, Capt. Henry
Spearman, Sir Alexander


Crawley, Aidan
Kershaw, Anthony
Stainton, Keith


Crosthwaite-Eyre, Col. Sir Oliver
Kimball, Marcus
Steel, David (Roxburgh)


Curran, Charles
King, Evelyn (Dorset, S.)
Studholme, Sir Henry


Currie, G. B. H.
Kirk, Peter
Talbot, John E.


Dalkeith, Earl of
Lambton, Viscount
Taylor, Sir Charles (Eastbourne)


Davies, Dr. Wyndham (Perry Barr)
Lancaster, Col. C. G.
Taylor, Edward M. (G'gow,Cathcart)


Dean, Paul
Legge-Bourke, Sir Harry
Taylor, Frank (Moss Side)


Deedes, Rt. Hn. W. F.
Lewis, Kenneth (Rutland)
Temple, John M.


Digby, Simon Wingfield
Litchfield, Capt. John
Thompson, Sir Richard (Croydon, S.)


Dodds-Parker, Douglas
Lloyd,Rt.Hn.Geoffrey (Sut'nC'dfield)
Thorpe, Jeremy


Elliot, Capt. Walter (Carshalton)
Lloyd, Ian (P'tsm'th, Langstone)
Tiley, Arthur (Bradford, W.)


Emery, Peter
Longbottom, Charles
Tilney, John (Wavertree)


Errington, Sir Eric
Lubbock, Eric
Turton, Rt. Hn. R. H.


Eyre, Reginald
McAdden, Sir Stephen
Tweedsmuir, Lady


Fisher, Nigel
MacArthur, Ian
van Straubenzee, W. R.


Fletcher-Cooke, Charles (Darwen)
Mackie, George Y. (C'ness &amp; S'land)
Vaughan-Morgan, Rt. Hn. Sir John


Fletcher-Cooke, Sir John (S'pton)
McLaren, Martin
Vickers, Dame Joan


Fraser, Ian (Plymouth, Sutton)
Maclean, Sir Fitzroy
Walder, David (High Peak)


Gardner, Edward
Maginnis, John E.
Walker, Peter (Worcester)


Gibson-Watt, David
Marten, Neil
Walters, Dennis


Gilmour, Sir John (East Fife)
Mathew, Robert
Ward, Dame Irene


Glover, Sir Douglas
Maude, Angus
Webster, David


Goodhew, Victor
Maxwell-Hyslop, R. J.
Wells, John (Maidstone)


Gower, Raymond
Maydon, Lt.-Cmdr. S. L. C.
Whitelaw, William


Grant, Anthony
Meyer, Sir Anthony
Williams, Sir Rolf Dudley (Exeter)


Gresham Cooke, R.
Mills, Peter (Torrington)
Wills, Sir Gerald (Bridgwater)


Griffiths, Peter (Smethwick)
Miscampbell, Norman
Wilson, Geoffrey (Truro)


Grimond, Rt. Hn. J.
Mitchell, David
Wise, A. R.


Gurden, Harold
Monro, Hector
Wolrige-Gordon, Patrick


Hall, John (Wycombe)
Morrison, Charles (Devizes)
Wood, Rt. Hn. Richard


Hall-Davis, A. G. F.
Munro-Lucas-Tooth, Sir Hugh
Wylie, N. R.


Hamilton, M. (Salisbury)
Murton, Oscar
Yates, William (The Wrekin)


Harris, Reader (Heston)
Noble, Rt. Hn. Michael
Younger, Hn. George


Harrison, Brian (Maldon)
Nugent, Rt. Hn. Sir Richard



Harrison, Col. Sir Harwood (Eye)
Onslow, Cranley
TELLERS FOR THE AYES:


Harvey, Sir Arthur Vere (Macclesf'd)
Orr-Ewing, Sir Ian
Mr. R. W. Elliott and


Harvey, John (Walthamstow, E.)
Page, John (Harrow, W.)
Mr. Jasper More.


Hawkins, Paul
Page, R. Graham (Crosby)





NOES


Abse, Leo
Buchanan, Richard
Driberg, Tom


Allaun, Frank (Salford, E.)
Callaghan, Rt. Hn. James
Duffy, Dr. A. E. P.


Alldritt, Walter
Carmichael, Neil
Dunn, James A.


Allen, Scholefield (Crewe)
Carter-Jones, Lewis
Edwards, Rt. Hn. Ness (Caerphilly)


Atkinson, Norman
Castle, Rt. Hn. Barbara
Ennals, David


Bacon, Miss Alice
Chapman, Donald
Ensor, David


Bagier, Cordon A. T.
Conlan, Bernard
Evans, Ioan (Birmingham, Yardley)


Barnett, Joel
Cousins, Rt. Hn. Frank
Fernyhough, E.


Baxter, William
Craddock, George (Bradford, S.)
Finch, Harold (Bedwellty)


Beaney, Alan
Crawshaw, Richard
Fitch, Alan (Wigan)


Bellenger, Rt. Hn. F. J.
Crossman, Rt. Hn. R. H. S.
Fletcher, Sir Eric (Islington, E.)


Bennett, J. (Glasgow, Bridgeton)
Cullen, Mrs. Alice
Fletcher, Ted (Darlington)


Blackburn, F.
Dalyell, Tam
Fletcher, Raymond (Ilkeston)


Blenkinsop, Arthur
Darling, George
Foot, Sir Dingle (Ipswich)


Boardman, H.
Davies, G. Elfed (Rhondda, E.)
Ford, Ben


Bowden, Rt. Hn. H. W. (Leics S.W.)
Davies, Harold (Leek)
Fraser, Rt. Hn. Tom (Hamilton)


Boyden, James
Davies, Ifor (Gower)
Galpern, Sir Myer


Braddock, Mrs. E. M.
Davies, S. O. (Merthyr)
Garrett, W. E.


Bray, Dr. Jeremy
de Freitas, Sir Geoffrey
Garrow, A.


Brown, Rt. Hn. George (Belper)
Delargy, Hugh
Ginsburg, David


Brown, Hugh D. (Glasgow, Provan)
Diamond, John
Gourlay, Harry


Brown, R. W. (Shoreditch &amp; Fbury)
Doig, Peter
Greenwood, Rt. Hn. Anthony


Buchan, Norman (Renfrewshire, W.)
Donnelly, Desmond
Gregory, Arnold







Grey, Charles
Maxwell, Robert
Short, Mrs. Renée (W'hampton,N.E.)


Griffiths, David (Rother Valley)
Millan, Bruce
Silkin, S. C. (Camberwell, Dulwich)


Hamilton, James (Bothwell)
Miller, Dr. M. S.
Silverman, Sydney (Nelson)


Hamilton, William (West File)
Milne, Edward (Blyth)
Slater, Mrs. Harriet (Stoke, N.)


Hannan, William
Molloy, William
Slater, Joseph (Sedgefield)


Harper, Joseph
Monslow, Walter
Small, William


Harrison, Walter (Wakefield)
Morris, Alfred (Wythenshawo)
Snow, Julian


Hart, Mrs. Judith
Morris, Charles (Openshaw)
Stewart, Rt. Hn. Michael


Hattersley, Roy
Morris, John (Aberavon)
Stonehouse, John


Hazell, Bert
Newens, Stan
Stones, William


Holman, Percy
Noel-Baker,Rt.Hn.Philip(Derby,S.)
Summerskill, Hn. Dr. Shirley


Horner, John
Norwood, Christopher
Swain, Thomas


Houghton, Rt. Hn. Douglas
Oakes, Gordon
Swingler, Stephen


Howarth, Harry (Wellingborough)
Ogden, Eric
Symonds, J. B.


Howell, Denis (Small Heath)
Oram, Albert E. (E. Ham, S.)
Taverne, Dick


Howie, W.
Orme, Stanley
Taylor, Bernard (Mansfield)


Hoy, James
Oswald, Thomas
Thomas, George (Cardiff, W.)


Irving, Sydney (Dartford)
Owen, Will
Thomas, Iorwerth (Rhondda, W.)


Jackson, Colin
Padley, Walter
Thomson, George (Dundee, E.)


Jay, Rt. Hn. Douglas
Page, Derek (King's Lynn)
Thornton, Ernest


Jeger, George (Goole)
Paget, R. T.
Tinn, James


Jenkins, Rt. Hn. Roy (Stechford)
Palmer, Arthur
Tomney, Frank


Johnson, James(K'ston-on-Hull,W.)
Park, Trevor (Derbyshire, S.E.)
Urwin, T. W.


Jones, Dan (Burnley)
Pavitt, Laurence
Varley, Erie G.


Jones, J. Idwal (Wrexham)
Pearson, Arthur (Pontypridd)
Wainwright, Edwin


Jones, T. W. (Merioneth)
Pentland, Norman
Walden, Brian (All Saints)


Kenyon, Clifford
Perry, Ernest G.
Walker, Harold (Doncaster)


Kerr, Mrs. Anne (R'ter &amp; Chatham)
Popplewell, Ernest
Wallace, George


Lawson, George
Price, J. T. (Westhoughton)
Warbey, William


Leadbitter, Ted
Probert, Arthur
Watkins, Tudor


Lee, Miss Jennie (Cannock)
Pursey, Cmdr. Harry
White, Mrs. Eirene


Lomas, Kenneth
Randall, Harry
Whitlock, William


McBride, Neil
Rankin, John
Wigg, Rt. Hn. George


MacColl, James
Rees, Merlyn
Willey, Rt. Hn. Frederick


MacDermot, Niall
Rhodes, Geoffrey
Williams, Alan (Swansea, W.)


McKay, Mrs. Margaret
Roberts, Goronwy (Caernarvon)
Williams, Albert (Abertillery)


Mackenzie, Gregor (Rutherglen)
Robertson, John (Paisley)
Willis, George (Edinburgh, E.)


MacMillan, Malcolm
Robinson, Rt. Hn.K.(St. Pancras.N.)
Wilson, William (Coventry, S.)


Mahon, Peter (Preston, S.)
Rodgers, William (Stockton)
Winterbottom, R. E.


Mahon, Simon (Bootle)
Rogers, George (Kensington, N.)



Mallalieu,J.P.W.(Huddersfield,E.)
Rose, Paul B.
TELLERS FOR THE NOES:


Manuel, Archie
Rowland, Christopher
Mr. Brian O'Malley and


Mapp, Charles
Shore, Peter (Stepney)
Mr. McCann.


Marsh, Richard
Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)

Amendment proposed: In page 63, line 25, at end insert:
Provided always that the expenditure in Scotland in respect of which investment allowances are calculated shall for the purpose of corporation tax be deemed to be increased by 40 per cent.—[Mr. Heath.]

Question put, That those words be there inserted:—

The Committee divided: Ayes 190, Noes 196.

Division No. 175.]
AYES
[10.46 p.m.


Agnew, Commander Sir Peter
Bruce-Gardyne, J.
Emery, Peter


Anstruther-Gray, Rt. Hn. Sir W.
Bryan, Paul
Errington, Sir Eric


Astor, John
Bullus, Sir Eric
Eyre, Reginald


Atkins, Humphrey
Campbell, Gordon
Fisher, Nigel


Awdry, Daniel
Carlisle, Mark
Fletcher-Cooke, Charles (Darwen)


Baker, W. H. K.
Carr, Rt. Hn. Robert
Fletcher-Cooke, Sir John (S'pton)


Barber, Rt. Hn. Anthony
Cary, Sir Robert
Fraser, Ian (Plymouth, Sutton)


Barlow, Sir John
Chataway, Christopher
Gardner, Edward


Batsford, Brian
Chichester-Clark, R.
Gibson-Watt, David


Bell, Ronald
Clark, Henry (Antrim, N.)
Gilmour, Sir John (East Fife)


Bennett, Sir Frederic (Torquay)
Clark, William (Nottingham, S.)
Glover, Sir Douglas


Berry, Hn. Anthony
Cole, Norman
Goodhew, Victor


Bessell, Peter
Cooke, Robert
Gower, Raymond


Biffen, John
Cooper, A. E.
Grant, Anthony


Biggs-Davison, John
Costain, A. P.
Gresham Cooke, R.


Bingham, R. M.
Crawley, Aidan
Griffiths, Peter (Smethwick)


Birch, Rt. Hn. Nigel
Crosthwalte-Eyre, Col. Sir Oliver
Grimond, Rt. Hn. J.


Black, Sir Cyril
Curran, Charles
Gurden, Harold


Bowen, Roderic (Cardigan)
Currie, G. B. H.
Hall, John (Wycombe)


Box, Donald
Dalkeith, Earl of
Hall-Davis, A. G. F.


Boyd-Carpenter, Rt. Hn. J.
Davies, Dr. Wyndham (Perry Barr)
Hamilton, M. (Salisbury)


Boyle, Rt. Hn. Sir Edward
Dean, Paul
Harris, Reader (Heston)


Brewis, John
Deedes, Rt. Hn. W. F.
Harrison, Brian (Maldon)


Brinton, Sir Tatton
Digby, Simon Wingfield
Harrison, Col. Sir Harwood (Eye)


Bromley-Davenport.Lt.-Col.SirWalter
Dodds-Parker, Douglas
Harvey, Sir Arthur Vere (Macclesf'd)


Brown, Sir Edward (Bath)
Elliot, Capt. Walter (Carshalton)
Harvey, John (Walthamstow, E.)




Hawkins, Paul
Marten, Neil
Spearman, Sir Alexander


Heald, Rt. Hn. Sir Lionel
Mathew, Robert
Stainton, Keith


Heath, Rt. Hn. Edward
Maude, Angus
Steel, David (Roxburgh)


Higgins, Terence L.
Maxwell-Hyslop, R. J.
Studholme, Sir Henry


Hiley, Joseph
Maydon, Lt.-Cmdr. S. L. C.
Talbot, John E.


Hill, J. E. B. (S. Norfolk)
Meyer, Sir Anthony
Taylor, Sir Charles (Eastbourne)


Hobson, Rt. Hn. Sir John
Mills, Peter (Torrington)
Taylor, Edward M. (G'gow,Cathcart)


Hooson, H. E.
Miscampbell, Norman
Taylor, Frank (Moss Side)


Hordern, Peter
Mitchell, David
Temple, John M.


Hornby, Richard
Monro, Hector
Thompson, Sir Richard (Croydon, S.)


Hornsby-Smith, Rt. Hn. Dame P.
More, Jasper
Thorpe, Jeremy


Hunt, John (Bromley)
Morrison, Charles (Devizes)
Tiley, Arthur (Bradford, W.)


Hutchison, Michael Clark
Munro-Lucas-Tooth, Sir Hugh
Tilney, John (Wavertree)


Iremonger, T. L.
Murton, Oscar
Turton, Rt. Hn. R. H.


Irvine, Bryant Godman (Rye)
Noble, Rt. Hn. Michael
Tweedsmuir, Lady


Jenkin, Patrick (Woodford)
Nugent, Rt. Hn. Sir Richard
van Straubenzee, W. R.


Johnston, Russell (Inverness)
Onslow, Cranley
Vaughan-Morgan, Rt. Hn. Sir John


Jopling, Michael
Orr-Ewing, Sir Ian
Vickers, Dame Joan


Joseph, Rt. Hn. Sir Keith
Page, John (Harrow, W.)
Walder, David (High Peak)


Kaberry, Sir Donald
Page, R. Graham (Crosby)
Walker, Peter (Worcester)


Kerby, Capt. Henry
Pearson, Sir Frank (Clitheroe)
Walters, Dennis


Kershaw, Anthony
Peel, John
Ward, Dame Irene


Kimball, Marcus
Percival, Ian
Webster, David


King, Evelyn (Dorset, S.)
Peyton, John
Wells, John (Maidstone)


Kirk, Peter
Pickthorn, Rt. Hn. Sir Kenneth
Whitelaw, William


Lambton, Viscount
Pitt, Dame Edith
Williams, Sir Rolf Dudley (Exeter)


Lancaster, Col. C. G.
Powell, Rt. Hn. J. Enoch
Wills, Sir Gerald (Bridgwater)


Legge-Bourke, Sir Harry
Price, David (Eastleigh)
Wilson, Geoffrey (Truro)


Lewis, Kenneth (Rutland)
Prior, J. M. L.
Wise, A. R.


Litchfield, Capt. John
Pym, Francis
Wolrige-Gordon, Patrick


Lloyd,Rt.Hn. Geoffrey (Sut'nC'dfield)
Rawlinson, Rt. Hn. Sir Peter
Wood, Rt. Hn. Richard


Lloyd, Ian (P'tsm'th, Langstone)
Redmayne, Rt. Hn. Sir Martin
Wylie, N. R.


Longbottom, Charles
Ridley, Hn. Nicholas
Yates, William (The Wrekin)


Lubbock, Eric
Ridsdale, Julian
younger, Hn. George


McAdden, Sir Stephen
Roberts, Sir Peter (Heeley)



Mackie, George Y. (C'ness &amp; S'land)
Rodgers, Sir John (Sevenoaks)
TELLERS FOR THE AYES:


McLaren, Martin
Shepherd, William
Mr. R. W. Elliott and


Maclean, Sir Fitzroy
Sinclair, Sir George
Mr. Ian MacArthur.


Maginnis, John E.
Smith, Dudley (Br'ntf'd &amp; Chiswick)





NOES


Abse, Leo
Delargy, Hugh
Howie, W.


Allaun, Frank (Salford, E.)
Diamond, John
Hoy, James


Alldritt, Walter
Doig, Peter
Irving, Sydney (Dartford)


Allen, Scholefield (Crewe)
Donnelly, Desmond
Jackson, Colin


Atkinson, Norman
Driberg, Tom
Jay, Rt. Hn. Douglas


Bacon, Miss Alice
Duffy, Dr. A. E. P.
Jeger, George (Goole)


Bagier, Gordon A. T.
Dunn, James A.
Jenkins, Rt. Hn. Roy (Stechford)


Barnett, Joel
Edwards, Rt. Hn. Ness (Caerphilly)
Johnson, James(K'ston-on-Hull,W.)


Batter, William
Ennals, David
Jones, Dan (Burnley)


Beaney, Alan
Ensor, David
Jones, J. Idwal (Wrexham)


Bellenger, Rt. Hn. F. J.
Evans, Ioan (Birmingham, Yardley)
Jones, T. W. (Merioneth)


Bennett, J. (Glasgow, Bridgeton)
Fernyhough, E.
Kenyon, Clifford


Blackburn, F.
Finch, Harold (Bedwellty)
Kerr, Mrs. Anne (R'ter &amp; Chatham)


Blenkinsop, Arthur
Fitch, Alan (Wigan)
Lawson, George


Boardman, H.
Fletcher, Sir Eric (Islington, E.)
Leadbitter, Ted


Bowden, Rt. Hn. H. W. (Leics S.W.)
Fletcher, Ted (Darlington)
Lee, Miss Jennie (Cannock)


Boyden, James
Fletcher, Raymond (Ilkeston)
Lomas, Kenneth


Braddock, Mrs. E. M.
Foot, Sir Dingle (Ipswich)
McBride, Neil


Bray, Dr. Jeremy
Ford, Ben
MacColl, James


Brown, Rt. Hn. George (Belper)
Fraser, Rt. Hn. Tom (Hamilton)
MacDermot, Niall


Brown, Hugh D. (Glasgow, Provan)
Galpern, Sir Myer
McKay, Mrs. Margaret


Brown, R. W. (Shoreditch &amp; Fbury)
Garrett, W. E.
Mackenzie, Gregor (Rutherglen)


Buchan, Norman (Renfrewshire, W.)
Garrow, A.
MacMillan, Malcolm


Buchanan, Richard
Ginsburg, David
Mahon, Peter (Preston, S.)


Callaghan, Rt. Hn. James
Gourlay, Harry
Mahon, Simon (Bootle)


Carmichael, Neil
Greenwood, Rt. Hn. Anthony
Mallalieu, J.P. W. (Huddersfield,E.)


Carter-Jones, Lewis
Gregory, Arnold
Manuel, Archie


Castle, Rt. Hn. Barbara
Grey, Charles
Mapp, Charles


Chapman, Donald
Griffiths, David (Rother Valley)
Marsh, Richard


Conlan, Bernard
Hamilton, James (Bothwell)
Maxwell, Robert


Cousins, Rt. Hn. Frank
Hamilton, William (West Fife)
Millan, Bruce


Craddock, George (Bradford, S.)
Hannan, William
Miller, Dr. M. S.


Crawshaw, Richard
Harper, Joseph
Milne, Edward (Blyth)


Crossman, Rt. Hn. R. H. S.
Harrison, Walter (Wakefield)
Molloy, William


Cullen, Mrs. Alice
Hart, Mrs. Judith
Monslow, Walter


Dalyell, Tam
Hattersley, Roy
Morris, Alfred (Wythenshawe)


Darling, George
Hazell, Bert
Morris, Charles (Openshaw)


Davies, G. Elfed (Rhondda, E.)
Holman, Percy
Morris, John (Aberavon)


Davies, Harold (Leek)
Horner, John
Newens, Stan


Davies, Ifor (Gower)
Houghton, Rt. Hn. Douglas
Noel-Baker, Rt.Hn.Philip (Derby,S.)


Davies, S. O. (Merthyr)
Howarth, Harry (Wellingborough)
Norwood, Christopher


de Freitas, Sir Geoffrey
Howell, Denis (Small Heath)
Oakes, Gordon







Ogden, Eric
Rodgers, William (Stockton)
Thornton, Ernest


Oram, Albert E. (E. Ham, S.)
Rogers, George (Kensington, N.)
Tinn, James


Orme, Stanley
Rose, Paul B.
Tomney, Frank


Oswald, Thomas
Rowland, Christopher
Urwin, T. W.


Owen, Will
Shore, Peter (Stepney)
Varley, Eric G.


Padley, Walter
Short, Rt.Hn.E.(N'c'tle-on-Tyne,C.)
Wainwright, Edwin


Page, Derek (King's Lynn)
Short, Mrs. Renée (W'hampton,N.E.)
Walden, Brian (All Saints)


Paget, R. T.
Silkin, S. C. (Camberwell, Dulwich)
Walker, Harold (Doncaster)


Palmer, Arthur
Silverman, Sydney (Nelson)
Wallace, George


Park, Trevor (Derbyshire, S.E.)
Slater, Mrs. Harriet (Stoke, N.)
Warbey, William


Pavitt, Laurence
Slater, Joseph (Sedgefield)
Watkins, Tudor


Pearson, Arthur (Pontypridd)
Small, William
White, Mrs. Eirene


Pentland, Norman
Snow, Julian
Whitlock, William


Perry, Ernest G.
Stewart, Rt. Hn. Michael
Wigg, Rt. Hn. George


Popplewell, Ernest
Storehouse, John
Willey, Rt. Hn. Frederick


Price, J. T. (Westhoughton)
Stones, William
Williams, Alan (Swansea, W.)


Probert, Arthur
Summerskill, Hn. Dr. Shirley
Williams, Albert (Abertillery)


Purvey, Cmdr. Harry
Swain, Thomas
Willis, George (Edinburgh, E.)


Randall, Harry
Swingler, Stephen
Wilson, William (Coventry, S.)


Rankin, John
Symonds, J. B.
Winterbottom, R. E.


Rees, Merlyn
Taverne, Dick



Rhodes, Geoffrey
Taylor, Bernard (Mansfield)
TELLERS FOR THE NOES:


Roberts, Goronwy (Caernarvon)
Thomas, George (Cardiff, W.)
Mr. Brian O'Malley and


Robertson, John (Paisley)
Thomas, Iorwerth (Rhondda, W.)
Mr. McCann.


Robinson, Rt. Hn.K.(St. Pancras,N.)
Thomson, George (Dundee, E.)

Mr. Diamond: I beg to move, in page 64, line 34, to leave out "that income" and to insert "those profits".
This is a purely drafting Amendment on the same lines as an earlier one, which the Committee will recall I explained at some length. The subsection refers to "those profits" on several occasions but,

in the last line but one the words "that income" has crept in. The Amendment corrects that.

Amendment agreed to.

Question put, That the Clause, as amended, stand part of the Bill:—

The Committee divided: Ayes, 189; Noes, 181.

Division No. 176.]
AYES
[10.57 p.m.


Abse, Leo
Diamond, John
Jay, Rt. Hn. Douglas


Allaun, Frank (Salford, E.)
Doig, Peter
Jeger, George (Goole)


Allen, Scholefield (Crewe)
Donnelly, Desmond
Jenkins, Rt. Hn. Roy (Stechford)


Atkinson, Norman
Driberg, Tom
Johnson,James(K'ston-on-Hull,W.)


Bacon, Miss Alice
Duffy, Dr. A. E. P.
Jones, Dan (Burnley)


Bagier, Gordon A. T.
Dunn, James A.
Jones, J. Idwal (Wrexham)


Barnett, Joel
Edwards, Rt. Hn. Ness (Caerphilly)
Jones, T. W. (Merioneth)


Baxter, William
Ennals, David
Kenyon, Clifford


Beaney, Alan
Ensor, David
Kerr, Mrs. Anne (R'ter &amp; Chatham)


Bellenger, Rt. Hn. F. J.
Evans, Ioan (Birmingham, Yardley)
Lawson, George


Bennett, J. (Glasgow, Bridgeton)
Fernyhough, E.
Leadbitter, Ted


Blackburn, F.
Finch, Harold (Bedwellty)
Lee, Miss Jennie (Cannock)


Blenkinsop, Arthur
Fitch, Alan (Wigan)
Lever, Harold (Cheetham)


Boardman, H.
Fletcher, Sir Eric (Islington, E.)
Lomas, Kenneth


Bowden, Rt. Hn. H. W. (Leics S.W.)
Fletcher, Ted (Darlington)
McBride, Neil


Boyden, James
Fletcher, Raymond (Ilkeston)
McCann, J.


Braddock, Mrs. E. M.
Foot, Sir Dingle (Ipswich)
MacColl, James


Bray, Dr. Jeremy
Ford, Ben
MacDermot, Niall


Brown, Rt. Hn. George (Belper)
Fraser, Rt. Hn. Tom (Hamilton)
McKay, Mrs. Margaret


Brown, Hugh D. (Glasgow, Provan)
Galpern, Sir Myer
Mackenzie, Gregor (Rutherglen)


Brown, R. W. (Shoreditch &amp; Fbury)
Garrett, W. E.
MacMillan, Malcolm


Buchan, Norman (Renfrewshire, W.)
Garrow, A.
Mahon, peter (Preston, S.)


Buchanan, Richard
Ginsburg, David
Mahon, Simon (Bootle)


Callaghan, Rt. Hn. James
Greenwood, Rt. Hn. Anthony
Mallalieu,J.P.W.(Huddersfield,E.)


Carmichael, Neil
Gregory, Arnold
Marsh, Richard


Carter-Jones, Lewis
Griffiths, David (Rother Valley)
Maxwell, Robert


Castle, Rt. Hn. Barbara
Hamilton, James (Bothwell)
Millan, Bruce


Chapman, Donald
Hamilton, William (West Fife)
Miller, Dr. M. S.


Conlan, Bernard
Hannan, William
Milne, Edward (Blyth)


Cousins, Rt. Hn. Frank
Harper, Joseph
Molloy, William


Craddock, George (Bradford, S.)
Harrison, Walter (Wakefield)
Monslow, Walter


Crawshaw, Richard
Hart, Mrs. Judith
Morris, Alfred (Wythenshawe)


Crossman, Rt. Hn. R. H. S.
Hattersley, Roy
Morris, Charles (Openshaw)


Cullen, Mrs. Alice
Hazell, Bert
Morris, John (Aberavon)


Dalyell, Tam
Horner, John
Newens, Stan


Darling, George
Houghton, Rt. Hn. Douglas
Noel-Baker,Rt.Hn.Philip(Derby,S.)


Davies, G. Elfed (Rhondda, E.)
Howarth, Harry (Wellingborough)
Norwood, Christopher


Davies, Harold (Leek)
Howell, Denis (Small Heath)
Oakes, Gordon


Davies, Ifor (Gower)
Howie, W.
Ogden, Eric


Davies, S. O. (Merthyr)
Hoy, James
O'Malley, Brian


de Freitas, Sir Geoffrey
Irving, Sydney (Dartford)
Orme, Stanley


Delargy, Hugh
Jackson, Colin
Oswald, Thomas




Owen, Will
Rowland, Christopher
Thornton, Ernest


Padley, Walter
Short, Peter (Stepney)
Tinn, James


Page, Derek (King's Lynn)
Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)
Tomney, Frank


Paget, R. T.
Short, Mrs. Renée (W'hampton,N.E.)
Urwin, T. W.


Palmer, Arthur
Silkin, S. C. (Camberwell, Dulwich)
Varley, Eric G.


Park, Trevor (Derbyshire, S.E.)
Silverman, Sydney (Nelson)
Wainwright, Edwin


Pavitt, Laurence
Slater, Mrs. Harriet (Stoke, N.)
Walden, Brian (All Saints)


Pearson, Arthur (Pontypridd)
Slater, Joseph (Sedgefield)
Walker, Harold (Doncaster)


Perry, Ernest G.
Small, William
Wallace, George


Popplewell, Ernest
Snow, Julian
Watkins, Tudor


Price, J. T. (Westhoughton)
Stewart, Rt. Hn. Michael
White, Mrs. Eirene


Probert, Arthur
Stonehouse, John
Whitlock, William


Pursey, Cmdr. Harry
Stones, William
Wigg, Rt. Hn. George


Randall, Harry
Summerskill, Hn. Dr. Shirley
Willey, Rt. Hn. Frederick


Rees, Merlyn
Swain, Thomas
Williams, Alan (Swansea, W.)


Rhodes, Geoffrey
Swingler, Stephen
Williams, Clifford (Abertillery)


Roberts, Goronwy (Caernarvon)
Symonds, J. B.
Willis, George (Edinburgh, E.)


Robertson, John (Paisley)
Taverne, Dick
Wilson, William (Coventry, S.)


Robinson, Rt. Hn.K.(St. Pancras, N.]
Taylor, Bernard (Mansfield)
Winterbottom, R. E.


Rodgers, William (Stockton)
Thomas, George (Cardiff, W.)



Rogers, George (Kensington, N.)
Thomas, Iorwerth (Rhondda, W.)
TELLERS FOR THE AYES:


Rose, Paul B.
Thomson, George (Dundee, E.)
Mr. Harry Gourlay and




Mr. Charles Grey.




NOES


Agnew, Commander Sir Peter
Glover, Sir Douglas
Meyer, Sir Anthony


Anstruther-Cray, Rt. Hn. Sir W.
Goodhew, Victor
Mills, Peter (Torrington)


Astor, John
Gower, Raymond
Miscampbell, Norman


Atkins, Humphrey
Grant, Anthony
Mitchell, David


Awdry, Daniel
Gresham Cooke, R.
Monro, Hector


Baker, W. H. K.
Griffiths, Peter (Smethwick)
More, Jasper


Barber, Rt. Hn. Anthony
Grimond, Rt. Hn. J.
Morrison, Charles (Devizes)


Barlow, Sir John
Gurden, Harold
Munro-Lucas-Tooth, sir Hugh


Batsford, Brian
Hall, John (Wycombe)
Murton, Oscar


Bell, Ronald
Hall-Davis, A. G. F.
Noble, Rt. Hn. Michael


Bennett, Sir Frederic (Torquay)
Hamilton, M. (Salisbury)
Nugent, Rt. Hn. Sir Richard


Berry, Hn. Anthony
Harris, Reader (Heston)
Onslow, Cranley


Bessell, Peter
Harrison, Brian (Maldon)
Orr-Ewing, Sir Ian


Biffen, John
Harrison, Col. Sir Harwood (Eye)
Page, John (Harrow, W.)


Biggs-Davison, John
Harvey, Sir Arthur Vere (Macclesf'd)
Page, R. Graham (Crosby)


Birch, Rt. Hn. Nigel
Harvey, John (Walthamstow, E.)
Pearson, Sir Frank (Clitheroe)


Bowen, Roderic (Cardigan)
Hawkins, Paul
Peel, John


Box, Donald
Heald, Rt. Hn. Sir Lionel
Percival, Ian


Boyd-Carpenter, Rt. Hn. J.
Heath, Rt. Hn. Edward
Peyton, John


Boyle, Rt. Hn. Sir Edward
Higgins, Terence L.
Pickthorn, Rt. Hn. Sir Kenneth


Brewis, John
Hiley, Joseph
Pitt, Dame Edith


Brinton, Sir Tatton
Hill, J. E. B. (S. Norfolk)
Powell, Rt. Hn. J. Enoch


Bromley-Davenport, Lt.-Col.Sir Walter
Hobson, Rt. Hn. Sir John
Price, David (Eastleigh)


Brown, Sir Edward (Bath)
Hooson, H. E.
Prior, J. M. L.


Bruce-Gardyne, J.
Hordern, Peter
Pym, Francis


Bryan, Paul
Hornby, Richard
Rawlinson, Rt. Hn. Sir Peter


Bullus, Sir Eric
Hornsby-Smith, Rt. Hn. Dame P.
Redmayne, Rt. Hn. Sir Martin


Carlisle, Mark
Hunt, John (Bromley)
Ridley, Hn. Nicholas


Carr, Rt. Hn. Robert
Hutchison, Michael Clark
Rodgers, Sir John (Sevenoaks)


Cary, Sir Robert
Iremonger, T. L.
Shepherd, William


Chataway, Christopher
Irvine, Bryant Godman (Rye)
Sinclair, Sir George


Chichester-Clark, R.
Jenkin, Patrick (Woodford)
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Clark, Henry (Antrim, N.)
Johnston, Russell (Inverness)
Spearman, Sir Alexander


Clark, William (Nottingham, S.)
Jopling, Michael
Stainton, Keith


Cole, Norman
Joseph, Rt. Hn. Sir Keith
Steel, David (Roxburgh)


Cooke, Robert
Kaberry, Sir Donald
Studholme, Sir Henry


Cooper, A. E.
Kerby, Capt. Henry
Talbot, John E.


Costain, A. P.
Kershaw, Anthony
Taylor, Sir Charles (Eastbourne)


Crawley, Aidan
Kimball, Marcus
Taylor, Edward M. (G'gow,Cathcart)


Crosthwaite-Eyre, Col. Sir Oliver
King, Evelyn (Dorset, S.)
Taylor, Frank (Moss Side)


Curran, Charles
Kirk, Peter
Temple, John M.


Dalkeith, Earl of
Lambton, Viscount
Thompson, Sir Richard (Croydon,S.)


Davies, Dr. Wyndham (Perry Barr)
Lancaster, Col. C. G.
Thorpe, Jeremy


Dean, Paul
Legge-Bourke, Sir Harry
Tiley, Arthur (Bradford, W.)


Deedes, Rt. Hn. W. F.
Lewis, Kenneth (Rutland)
Tilney, John (Wavertree)


Digby, Simon Wingfield
Litchfield, Capt. John
Turton, Rt. Hn. R. H.


Dodds-Parker, Douglas
Lloyd, Rt.Hn. Geoffrey (Sut'nC'dfield)
Tweedsmuir, Lady


Elliot, Capt. Walter (Carshalton)
Lloyd, Ian (P'tsm'th, Langstone)
van Straubenzee, W. R.


Elliott, R. W. (N'c'tle-upon-Tyne,N.)
Longbottom, Charles
Vickers, Dame Joan


Emery, Peter
Lubbock, Eric
Walder, David (High Peak)


Errington, Sir Eric
McAdden, Sir Stephen
Walker, Peter (Worcester)


Eyre, Reginald
Mackie, George Y. (C'ness &amp; S'land)
Walters, Dennis


Fisher, Nigel
Maginnis, John E.
Ward, Dame Irene


Fletcher-Cooke, Sir John (S'pton)
Marten, Neil
Webster, David


Fraser, Ian (Plymouth, Sutton)
Mathew, Robert
Wells, John (Maidstone)


Gardner, Edward
Maude, Angus
Whitelaw, William


Gibson-Watt, David
Maxwell-Hyslop, R. J.
Williams, Sir Rolf Dudley (Exeter)


Gilmour, Sir John (East Fife)
Maydon, Lt.-Cmdr. S. L. C.
Wills, Sir Gerald (Bridgwater)







Wilson, Geoffrey (Truro)
Wylie, N. R.
TELLERS FOR THE NOES:


Wise, A. R.
Yates, William (The Wrekin)
Mr Martin McLaren and


Wolrige-Gordon, Patrick
Younger, Hn. George
Mr. Ian MacArthur.


Wood. Rt. Hn. Richard

Clause, as amended, ordered to stand part of the Bill.

Clause 53 ordered to stand part of the Bill.

Clause 54.—(RELIEF FOR TRADING LOSSES, OTHER THAN TERMINAL LOSSES.)

Mr. William Clark: I beg to move Amendment No. 318, in page 66, line 4, to leave out
trading income from the trade
and to insert "profits".
Although I do not want to labour it at this late hour, this is an extremely important point because, as the Bill stands, for the purpose of Corporation Tax a loss can be set off against trading income from the trade. In Income Tax circles, "the trade" is very difficult to define. What is the position if one is running a composite business? How can we define "the trade"? One could have someone running a dyeing and cleaning business, and perhaps making a loss on the dyeing side and a profit on the cleaning part. I understand that as the Bill is drafted the loss on the dyeing business could not be set off against the cleaning sides' profits. A particularly germane example is the departmental store with a clothing department and other departments. It could also run an estate agency business as many of these stores do. I have no doubt that the Minister can think of other examples.
We should have a clearer definition of "the trade". If a trader makes a loss on one part of the business there should be no question but that he should be able to set off that loss against any profitable part of the same business although it is not necessarily the same trade. I hope that the Minister will say something about that.
I understand that it would be convenient to discuss at the same time Amendment No. 599, in Clause 51, page 62, line 6, at end insert
and so far as in any accounting period there still exist allowable losses, they shall be allowed as a deduction from the company's total profits in that accounting period".

The Chairman: Yes, I think that would be convenient.

Mr. Clark: My hon. Friends will elaborate on this, but the point on Amendment No. 599 is that what happens under the Corporation Tax is that the Chancellor has said that, as far as companies are concerned, it makes no difference where they get their income from, whether from trading activities or from capital appreciation or realisation. It is all put into the same pot and 35 per cent. Corporation Tax is payable.
If one takes the premise that for a business one considers all its income, trading or capital, as the income of the company on which 40 per cent. is paid, one allows trading losses against that combined profit. Surely it is logical to allow capital losses against that total income. If a company dealing in property at the moment makes a capital appreciation the Chancellor knows that there are many tax cases in our legislation where we have many companies which over four or five years may have sold a house or bought a house, and one or two such sales or purchases can make them liable as dealers. If they are brought in as dealers, then their income from capital realisation is allowed, they pay the ordinary tax or, in this case, Corporation Tax on it. In that case, the Revenue is also giving any capital losses against such dealing companies' profits.
I should have thought—indeed, I hope—that the Inland Revenue had overlooked this point. I am sure that it could not be the intention of the Chancellor to penalise companies as opposed to partnerships, for example, more heavily than any other taxpayer in the same field. By the very fact that a company has a limited liability, I should not have thought it was the intention of even this Government to penalise that sort of venture. I hope that the Minister will be able to give some indication that the same trade does in fact allow for composite trade within the company, and that capital losses against capital profits and trading profits can be put into the same pot and the Corporation Tax charged on the net amount.
I have tried to be brief and I hope the Minister has taken the two points I have made. The reason I have been brief is because of the long debate we have just had. I assure the Committee that it is an extremely important point for companies. It is regrettable sometimes that late at night during the Committee stage of a Finance Bill one gets to an important point of principle and, because of the lateness of the hour, the matter is brushed aside. I assure the Minister that this is an extremely important point not only for companies but for the successful operation of the Corporation Tax. I am sure he will agree that if it is felt that any tax is unfair in its application, this brings that tax into more disrepute than a tax that appears and is in fact equitable.
I hope, therefore, that the Minister will give us some assurance on the two points. Obviously, I am sure he would not hide or shelter behind the fact that these Amendments may not be in the draftsman's jargon that would be acceptable to the Government. We on this side of the Committee would not mind if the wording were changed provided the spirit of our Amendment was subsequently put down.

11.15 p.m.

Mr. Patrick Jenkin: The purpose of Amendment No. 599 in the names of some of my hon. Friends and myself is to make it quite clear that realised capital losses can be set against revenue profits. It would be out of order if I harked back to Part III of the Bill which deals with capital gains taxation, but it would be right to say that a point which was pressed but refused by the Government on this was to allow in the case of individuals capital losses to be set against other income. Although it was grossly unfair that it should be so refused there was a certain logic in that. After all, these are different taxes in the case of individuals—Income Tax and Capital Gains Tax. They are charged on what are for the individual different kinds of "enrichment" at different rates and subject to different reliefs and exemptions. But the position of companies is exactly the reverse, for here in fact we are dealing with the same tax.
Capital gains in the hands of a company and revenue profits are treated in exactly the same way and taxed at the same rate. They have the same treatment as far as dividend paid by the company out of profit is concerned. This represents a change in the law for capital dividends. Although the rules of computation of capital gains and revenue profits are entirely different, the taxation of the resultant enrichment, whether a capital gain or of income on the plane of revenue, is identical. What, then, is the argument for refusing to allow capital losses to be set against revenue income? Alternatively, why cannot trading losses be set against capital gains?
The whole elaborate structure of our taxation system as evolved over the years has been to try to make sure that taxes are paid according to the taxable capacity of the taxpayer. Great efforts are made to ensure fairness between one taxpayer and another. Taxes are paid on the true assessment overall of the relative profits and gains made by the taxpayer. Relief for losses is an essential part of this and it is entirely contrary to this broad concept of the system that relief for losses should be limited in any way. For practical reasons there has, of course, to be a limit on the length of time over which they can be carried back, but reliefs for losses should be as widely drawn as they can be.
To exclude loss relief in the circumstances which I have described is entirely inconsistent with the Chancellor's own description of his new Corporation Tax in his Budget speech when he said:
I propose that capital gains realised by companies—and this applies to both short-term and long-term gains—shall be subject to corporation tax at the corporation tax rate. A company is a continuing association which has as its main purpose making profits; whether those profits arise as trading income or as capital gains is immaterial, and I think that it is right that they should be taxed at the same rate."—[OFFICIAL REPORT, 6th April, 1965; Vol. 710, c. 250–1.]
If that is immaterial it is entirely wrong that capital losses should not be allowed against profits.
It is also interesting that any limits of loss relief almost inevitably press more hardly on small companies than on big companies. I derive support for that proposition from what may be regarded by hon. Members opposite as a somewhat


unlikely source, a Fabian pamphlet, "Capital Gains Taxation—A Study mainly of American Experience", by Mrs. Kathleen Langley.
Mrs. Langley examined the American practice in considerable detail, and, in discussing the effect of different provisions for loss relief which have applied from time to time in America, she came to the conclusion that limitations on loss allowances are
likely to be especially hard on the small investor, who is less likely to have gains or income (if losses can be offset against income) against which he can make use of his loss allowances".
On page 15 of the pamphlet, she goes on to say:
He may have his capital wiped out by a succession of losses. Statistics reveal that the middle and lower income groups were the main victims of loss limitations. It would appear that capital gains taxation does not always tend to reduce the inequality of capital holdings as much as might be expected.
This conclusion is not surprising, and I submit that it carries considerable weight coming from that source.
Mrs. Langley was writing about individuals, but exactly the same applies to small businesses. A company which makes a loss in any year may be forced to realise its capital assets in order to cover its commitments, and, in the course of realising those assets, it may realise capital gains as there is no relief for inflation. It would be a ridiculous situation to find a company having its capital wiped out, as Mrs. Langley said, by a series of losses but having to pay Capital Gains Tax to the Treasury all the time. This would be a monstrous injustice, and any businessman faced with such a situation would regard the system as one of gross inequity. The Government have a chance here to put the inequity right, and I hope very much that the Minister will accept the Amendment.

The Minister without Portfolio (Sir Eric Fletcher): The hon. Member for Nottingham, South (Mr. William Clark) asked what would be the position as regards a trader who carried on a composite trade. He need have no fears on that score. If a company makes a loss in trading, it is entitled to set-off against any income, and this would, of course, include

the profits of any other trade. In other words, what we are seeking to do in this Clause is to carry over into the scheme of the Corporation Tax the exactly similar provisions which now apply under the Income Tax Act with regard to the trader who carries on a composite business. If there are two entirely separate kinds of trading carried on, different considerations might arise; but there will be no difference in the practice which operates under the Corporation Tax code from that which exists for the Income Tax code.
The hon. Gentleman will recognise that the effect of the Amendment is totally different and raises far wider questions. As the Clause stands, the position is that trading losses can, at the option of the taxpayer, be set against all profits in the same year as well as all profits in the previous year, whether from trading, capital gains or investment income; or, if the taxpayer does not desire that, he can carry forward his trading losses against trading profits for any subsequent year. The effect of the Amendment would be to enable the trader to carry forward trading losses in a given year not only against trading profits in subsequent years but against all other profits in subsequent years whether derived from investment income, capital gains or any other source.
I am sure that the hon. Gentleman appreciates that that would be open to great objections. The whole principle on which trading losses should be carried forward in subsequent years was examined in considerable detail by the Millard Tucker Committee and by the Royal Commission on the Taxation of Profits and Income. In its Final Report, the Royal Commission expressly adopted the recommendations of the Millard Tucker Committee with regard to relief for losses, the appropriate references being found in paragraph 488 on page 148. Therefore, the Amendment as it stands is quite unacceptable to the Government and, I believe, contrary to the advice which has been given on this particular subject about relief for losses.

Mr. William Clark: Is not this exactly the same position with a dealing company at the moment? A dealing company can carry forward those losses and set them off against subsequent profits, whether trading or carry forward.

Sir Eric Fletcher: Different considerations apply with regard to dealing companies. We are discussing the position of trading companies and I am explaining that the effect of the Amendment would be to enable a trading company to carry forward trading losses against subsequent profits derived not from trading but from other sources and would expose itself to the mischief to which the Royal Commission drew attention.

Mr. William Clark: The right hon. Gentleman has not really answered my point. I am not talking about a dealing company dealing solely in securities or properties. I am speaking about a company which is held to be a dealer in something apart from its normal trade. It might be a trading company and might be caught, if that is the right word, as a dealer for tax purposes as far as selling and buying houses or factories, or whatever it may be, is concerned. In that case it is treated as income of that company and it is not a question solely of dealing companies in securities. It is a company held to be a dealer for some other part in this business.

Sir Eric Fletcher: I appreciate what the hon. Gentleman is saying but I do not think that in any way affects the argument I was putting to the Committee that, for the reasons given by the Royal Commission, this Amendment is quite unacceptable.
To turn to the arguments addressed to the Committee by the hon. Gentleman the Member for Wanstead and Woodford (Mr. Patrick Jenkin). It was indicated that, with this Amendment, we could also discuss Amendment No. 599, which is an Amendment to Clause 51, which has already been passed by the Committee and so is an Amendment which cannot be moved. Nevertheless, I think I ought to explain why, if the Amendment had been selected when we were discussing Clause 51, it would not have been acceptable to the Government and why I should have been obliged to invite the Committee to resist it. The position does not in my view produce any inequitable results under the Clause as drafted.
The hon. Member referred to the words which my right hon. Friend the Chancellor used in reference to the proposition that the rate of tax payable by a company on capital gains should be the same

as the rate of tax on its trading profits. The hon. Member quoted what my right hon. Friend said in column 250 of the OFFICIAL REPORT of 6th April of this year. I do not agree with the deductions which he drew from my right hon. Friend's observations.
My right hon. Friend was submitting that in the case of a corporation it was manifestly sensible that the same rate of tax should be paid by a company in respect of its profits whether they arose in the course of trade as trading income or whether they arose from capital gains. My right hon. Friend was arguing that the same rate should apply. In my view, it by no means follows that, because two categories of receipt attract the same rate of tax, they ought on that account to be treated as interchangeable for the purpose of setting off losses. The principle enunciated in the Bill is that capital losses should be set off against capital gains. As the hon. Member himself indicated, that is the rule in regard to individuals and rightly so. It would be very curious if capital losses could be set off against the other income of an individual and it would produce obviously undesirable results for the Exchequer and all other taxpayers.
If that is a sensible rule in respect of an individual it seems to follow that it is quite a sensible rule in respect of a company; and to have one rule in this respect for an individual and another rule in respect of a company would produce inequity as between one taxpayer and another which is something that we are anxious to avoid. Therefore, in the scheme of things that we are submitting to the Committee in connection with the Corporation Tax we think that it is right and logical to adhere to the principle that capital losses should be set off against capital gains only.

11.30 p.m.

Mr. Barber: In view of the hour I will say only a few words about Amendment No. 599 which is being discussed with the one which was moved, by my hon. Friend the Member for Nottingham, South (Mr. William Clark). It is an Amendment to Clause 51 and whether we agree with the Minister without Portfolio or not we have no means by which we can express our approval or disapproval. Therefore, I will say no more about it.
However, I certainly have some doubts about the Amendment before us, because there may be circumstances where a company is carrying on two entirely separate trades under Class I of Schedule D, not a composite trade, and we thought that the relief for trading losses as set out in Clause 54 for the purposes of the Corporation Tax differed from the system of relief in this respect for Income Tax purposes. However, the hon. Gentleman has assured us that this is not so and we will therefore consider what he has said. It may be that we have misunderstood the purport of the Clause. In these circumstances I am sure that my hon. Friend will wish to withdraw the Amendment.

Mr. William Clark: In view of what has been said, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Sir Eric Fletcher: I beg to move, Amendment No. 610, in page 66, line 10, after "income", to insert "or profits".
This is a drafting Amendment, but perhaps, in fairness to the Committee, I should shortly explain its effect. Subsection (1) provides a general rule that trading losses in an accounting period may go forward against trading income of subsequent periods. Subsection (2) provides another relief, which is an adaptation of Section 341 of the Income Tax Act of 1952, by allowing trading loses for any accounting period to be set against profits of any description of the period and of the preceding period of the same length. The last words of subsection (1) provide that the loss which a company may claim to carry forward is so much of the loss,
as cannot, on that claim or on a claim (if made) under subsection (2) below, be relieved against income of an earlier accounting period.
It seems to us, on reflection that the simple word "income" will not secure the objectives that we have in mind and the Amendment accordingly proposes that we should insert "or profits" to meet this point.

Mr. William Clark: I am sure that we will not fall out about this. Why did the hon. Gentleman not delete "income"

and put "profits"? Clause 42, page 50, line 28, clearly says
'Profits' means income and chargeable gains"….
Is not the hon. Gentleman now saying "under subsection (2) below, be relieved against income and income and chargeable profits"? I cannot see it is necessary to have the double "income".

Sir Eric Fletcher: This is a highly technical matter. We concluded that it would make the subsection much more appropriate if we inserted the words "or profits". I do not think that the hon. Member will find that there is any inconsistency between having these words in the Clause and the earlier Clause which he mentioned.

Mr. William Clark: That earlier Clause is the definition Clause. It says that "profits" means "income" and so on. Should not this provision have said "profits as defined in the previous Clause"?

Sir Eric Fletcher: I do not think so. The phrase "income or profits" was intended to do two things. First, it was intended to ensure that losses carried forward were set against trading income of succeeding accounting period in turn, thus preventing the claimant from skipping a period. For that purpose the word "income" is good enough, because losses can be carried forward only against trading income, which is aptly enough covered by the term "income". Secondly, we want to ensure that what goes forward is reduced by what is allowed under subsection (2) against "profits of whatever description".
It should therefore be clear to the hon. Gentleman that in this context the word "income" will not suffice and that to make the matter clear we must add the words "or profits".

Mr. Barber: I wish to say only that I give notice that we shall go into this matter later, because we may wish to delete "or income". We shall have to consider what the hon. Gentleman has said.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 55 ordered to stand part of the Bill.

Clause 56.—(LOSSES IN TRANSACTIONS FROM WHICH INCOME WOULD BE CHARGEABLE UNDER SCHEDULE D CASE VI.)

Mr. Patrick Jenkin: I beg to move Amendment No. 500, in page 69, line 7, to leave out "(leases or premiums, etc.)" and to add:
(treatment of premiums as rent, etc.)".
I do not wish to depress the Treasury Bench, but with this Amendment we are half way to the thousand, though by the pages of the Bill we are less than one-third of the way through. I do not wish right hon. Gentlemen opposite to go home in an unhappy frame of mind, but it is interesting to note that of over 750 Amendments nearly 300 have been tabled by the Chancellor of the Exchequer. This is a most ramshackle Bill. It will end up like the Irishman's waistcoat—seven new backs and nine new fronts—or like the Chinaman's axe—six new handles and five new heads.
It is about time that we recognised the enormous haste with which the Bill has been flung together. It set the Parliamentary draftsmen an impossible task and one can only marvel at the skill with which they have wrestled with the problems with which they were faced. However, inevitably the Bill is riddled with mistakes which we have had to put right. One might suggest that the Chancellor should end by tabling a new Clause ending with "E. and O.E." The Bill is like counsel who started a statement of claim by saying that on the day stated the plaintiff—

The Temporary Chairman (Sir Herbert Butcher): Order. The hon. Gentleman would be well advised to come to his Amendment.

Mr. Jenkin: The Clause clearly bears evidence of having been drafted in extreme haste. It has a palpable mistake, for the words which I propose to delete are meaningless. Yet all the draftsmen had to do was to take the side note from the relevant Section of the Finance Act, 1963, as I have done, and adapt it so as to refer to all three Sections of that Act. I submit that I have brought light where only darkness existed before.
Perhaps the explanation of how the draftsmen came to make this extraordinary mistake is that Sections 22, 23 and 24 of the 1963 Act deal with a number

of complex matters relating to land—leases for premiums, or at lower than market values, sales subject to right of re-conveyance and other complicated matters. One can appreciate that this required great expertise.
I wonder whether possibly the Chancellor turned for advice to what I understand is a fairly recently formed organisation which advertised in the Sunday Telegraph on 2nd May. I quote the advertisement:
95 per cent. mortgages still available up to £6,000, 90 per cent. up to £15,000, under our exclusive executive house purchase plan. Write giving details of age, salary, purchase price and loan required to The Harold Wilson Organisation, Cromwell House, Waverley Street, Nottingham.
I would submit that this is a matter which requires the closest investigation, and I refer it to my hon. Friend the Member for Nottingham, South (Mr. William Clark). I am happy to put right what obviously has gone wrong as the result of the advice tendered by the other Harold Wilson organisation and for which that organisation must be held entirely responsible.

Sir Eric Fletcher: A great deal of what the hon. Member said seemed to me totally irrelevant to the Amendment he has proposed, but I must take exception to his introductory remarks in which he complained about the draftsmanship of the Bill. I think that by most connoisseurs of Parliamentary draftsmanship the Bill would be regarded as a masterpiece of elegance and lucidity—[HON. MEMBERS: "Oh."] It may be difficult for some hon. Members opposite to understand it, but it only requires an elementary amount of attention to its Clauses for anyone to realise that it is couched in the simplest and clearest possible language.
These strictures which hon. Members opposite continually are making about the draftsmanship—I am not talking about the principles of the Bill, but about the draftsmanship—are completely unfounded. Every independent, objective lawyer to whom I have talked about it, every accountant—everybody who has really taken the trouble to read the Bill through carefully—has been impressed with the masterly way in which this complicated subject has been condensed into lucid and intelligible English.
Having said that, I do not want to take away from the hon. Gentleman any credit he may claim to himself for having detected a very minor technical flaw in one line which merely is a description of a Section in an Act. I think, perhaps, that the Amendment he proposes is an improvement on the words in the Clause as drawn, and for that reason I am prepared to advise the Committee to accept it.

Mr. Heath: In view of the Minister's open declaration that he has come not to bury my hon. Friend, but to praise him, we accept it.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 57.—(COMPANY RECONSTRUCTIONS WITHOUT CHANGE OF OWNERSHIP.)

Question proposed, That the Clause stand part of the Bill.

Mr. William Clark: I wonder whether the Minister could answer two very simple questions. Subsection (4) says that the value of the trading stock shall be taken at market value.
Under Section 143 of the 1952 Act, when there is discontinuance of a business in that it is taken over by another company, but the trade continues except for the difference in name, it has always been the case that one takes the sale price for the value of consideration. I wonder whether the Minister would have a look at this again, because I do not think that there is any reason why, in this context, the wording we have had in Section 143 of the 1952 Act, which has operated very successfully, should be changed.
Clause 57 (4) is not really at variance with Section 1943 of the 1952 Act.
11.45 p.m.
I should like to raise one other point. On reconstruction of a company, under the Clause as drafted one is able to carry forward accumulated losses. Surely, it is not the intention of the Government to penalise companies any more. They should allow them to carry forward capital losses in the event of a reconstruction. If a trading loss is allowed to be carried forward from the old company

to the reconstructed company, it is surely logical to allow capital losses from the old company also to be carried forward to the reconstructed company. If the Minister is not able immediately to answer these points, perhaps he will look at them again before Report.

Sir Eric Fletcher: I must protest against the observation of the hon. Member for Nottingham, South (Mr. William Clark) when he says that he hopes that it is not the intention to penalise companies further. Surely, the hon. Member realises by now that the whole object of this new and equitable system of fiscal legislation is to assist companies so that we can have a fairer and more just system of taxation for the benefit of all companies.
I will certainly respond to the hon. Member's invitation to look between now and Report at the two points which he has raised. It is the intention that Clause 57 should reproduce in the scheme of Corporation Tax precisely the same arrangements that now exist and operate on a company reconstruction where there is no change of ownership. I will consider whether there is any substance in the points raised by the hon. Member and will either write to him or consider whether any Amendment is required on Report.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 58 ordered to stand part of the Bill.

Clause 59.—(APPLICATION AND ADAPTA- TION OF INCOME TAX ACT, AS TO CAPITAL ALLOWANCES AND OTHER MATTERS.)

Question proposed, That the Clause stand part of the Bill.

Mr. William Clark: There is another matter which I should like the Minister to consider. Subsection (2) states that
For the purposes of corporation tax the right to an allowance … shall be determined … by applying the law in force for the year of assessment in which the accounting period ends".
This could give rise to a ludicrous position for a company if its year ends on, say, 6th April. Suppose that a company's year ends on 6th April, 1966. The


year of assessment in which it falls is the year 1966/67. It may be that in the 1966 Budget, legislation will be brought forward which is operative in the year 1966/67. If the event that is spoken of in subsection (2) took place in 1965/66, this could lead to retrospective legislation. This, again, is a technical point. It depends upon the date on which a company's year ends.
I suggest that instead of providing that the criterion is to be the law in force for t he year of assessment, the criterion should he the law in force when the event occurred. This would restore the position that the event which it is sought to catch under the Clause would be governed by the law in force when the event took place. By the wording of the Clause, retrospective legislation is possible, particularly when a company's year ends on 6th April or later. I wonder whether the Minister would be kind enough to consider this matter and give a reply on Report rather than write to me.

Mr. Diamond: The hon. Gentleman has expressed his doubts with his usual clarity and lucidity, and it is only my own lack of immediate comprehension which prevents me from giving him an immediate answer, and encourages me to say that the better course would be to read carefully in HANSARD what he has said. I do not think that there is a difficulty; but if there is, I shall look at it very carefully and either, as he asked, write to him, or else introduce an Amendment on Report. If there is nothing to introduce on Report, I think that it would be courteous to write to the hon. Gentleman explaining why that is so.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Mr. Diamond: It is my pleasant duty to move,
That the Chairman do report Progress and ask leave to sit again.
This is a very suitable hour at which to retire, having regard to the fact that we all want to be very fresh for the somewhat extensive labours which face us tomorrow, and which, I am sure, we shall get through all the more quickly if we retire at an early hour tonight. We have made rapid progress since we got over the major series of Amendments which, naturally, called forth a great deal of interesting discussion, and I hope, there-

fore, that this Motion will be accepted by the Committee.

Mr. Heath: I find myself in agreement with the right hon. Gentleman in the happy approach that he has made to the Committee. We have added another nine Clauses to the Bill, although, as we realise, we started the Committee stage today an hour late. I think that the Committee can feel that we have made good progress in dealing with the Bill, and I support the Motion.

Question put and agreed to.

Committee report Progress; to sit again Tomorrow.

FINANCE [MONEY] (No. 2)

Resolution reported:
That if any Act of the present Session relating to Finance authorises the making to companies of payments out of moneys provided by Parliament with a view to offsetting increases in the total taxation charged on trading income of the company and dividends paid by the company, being payments calculated by reference to reductions in the credit allowed to the company for overseas taxation, the Act may in that connection provide specially for companies which have been overseas trade corporations by treating them as if they had never been overseas trade corporations and relating the payments to rates of credit for foreign tax artificially arrived at.

Resolution agreed to.

EDUCATION (IMMIGRANT CHILDREN)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. O'Malley.]

11.53 p.m.

Mr. Frank Taylor: I count myself fortunate tonight on two counts. First, because I have the opportunity to speak about the difficulties facing us on the education front with immigrants, and, secondly, because I am able to begin this speech before midnight, when I expected to do it somewhere near the dawn.
What I want to do, first, is to show that there is a problem with regard to immigrants at school, which is centred on the big cities, particularly, London, Birmingham, Liverpool and Manchester. These are outstanding, but there are also areas of difficulty elsewhere, where, to say the least, there is serious concern over the problems facing them. So as not to deal exclusively with my constituency


of Moss Side, I propose to give a few figures in respect of other parts of the country.
In London, at the latter end of last year, the hon. Member for Paddington, North (Mr. Parkin) discovered that in some classes in some schools in his constituency there were only two or three white children in the class. I think that it is unnecessary to quote the many speeches and statements which have been made about the position in Birmingham and Liverpool, except to say that in 1962 it was calculated that in Birmingham 11 per cent. of the residents were immigrants, although 60 per cent. of these were Irish and were not coloured.
I am sure that the hon. Gentleman will accept that these places have large numbers of immigrants, just as I am sure he will accept that in considering immigrants one must recognise that the majority are coloured.
In Bradford, at the end of last year, where there were said to be 13,000 immigrants, some schools had more than 50 per cent. immigrant children, and 60 per cent. of those immigrants had arrived in England without any knowledge of English. In respect of Manchester, and particularly Moss Side, I have more detailed figures. In the city as a whole the immigrants comprise 26 different nationalities, and in 17 schools there are substantial numbers of immigrants. Percentage figures are available in respect of these schools, and there are six or seven schools, mainly in my constituency, which have very high percentages of immigrant children.
Respectively the figures are 36 per cent., 38 per cent. and 39 per cent. in three schools, 43 per cent. in each of two other schools, and 53 per cent. in another. The top figure is 57 per cent. These figures are extraordinary, and I am sure they have not previously been appreciated by many people. It is certain that these figures are increasing, overall, month by month.
One important point that emerges from these statistics is that in Manchester there are four times as many 5-year-old immigrant children as there are 11-year-olds. I will return to the implications of this situation later. Inside the overall immigrant situation there is the problem of immigrant children, mainly born abroad,

who need special help. This is almost invariably due to the fact that they speak no English. Their education presents a very difficult problem.
This does not necessarily mean that they are unintelligent; it means, usually, that they are backward because of the conditions of their upbringing, prior to coming to this country. It might help if I quote some other figures concerning Manchester, for 1964, giving separate comparative totals of the different nationalities attending some of the schools, broken down into two divisions—juniors and infants. I shall show the importance of that later. The highest numbers are from the West Indies where there are 83 juniors as against 21 infants—

Mr. Paul B. Rose: Does not the hon. Member agree that the main problem involved is one of language, and does not he further agree, therefore, that if the majority of these children are West Indian this problem does not arise.

Mr. Taylor: I shall deal adequately with that point when I come to it.
In the case of Pakistanis, there are 72 juniors as against 67 infants, and there are 45 juniors from India as against 15 infants. These figures are interesting for two reasons. One is that although one would have thought that the Indians and Pakistanis, who normally speak their own language—Punjabi, Urdu, Hindi, or some other native Indian tongue—would have the largest number of children in both categories needing special attention, the figures show that West Indians have by far the highest number of juniors in need of special attention.
Looking into the matter further, we find that the reason appears to be that although West Indian children speak English as their native tongue they speak a kind of patois based on eighteenth century English, which is quite unintelligible in this country. That is what the statistics show: it is not just what I am saying. More junior West Indians are in need of special attention in the Manchester area than any other nationality. Once again, there is an interesting difference between the number of juniors and the number of infants, which I shall deal with later.
One would have thought that this problem could be dealt with by importing foreign teachers who had a closer affinity with these categories of children, and could, therefore, bring them along better, but efforts made on this front have not proved successful, because many foreign teachers, although quite adequately qualified, cannot be understood even by the interviewing officers here, once again because their type of English is so different from English as we know it. Consequently, this has not proved to be a solution. If they are not intelligible to the interviewing officers they would not be intelligible to the children whom they would be trying to teach English.
The problem falls under three main headings. First are the families who have no English at all, neither the parents or children. The second class, including West Indians, are those who speak a patois which puts them in almost the same category as the first. The third group is comprised of cases where the children come with their parents to this country and where the parents can speak English quite well but cannot read or write. As a result, the children start heir education suffering a setback.
Among these difficulties is a bright point, some blue sky among the cloud. It is that there are far more younger children of immigrants at school than older immigrant children. However, this smaller group of older children have a special problem. The older children of school age who come to this country have a problem which the younger children, particularly those born here, do not have. Often the younger ones are brought up in an environment with English being spoken. The problem will, therefore, work itself out as the years go by because in our schools there are more and more children who were brought up in this environment. Having been born in this country, they do not have the same language difficulty as many of the older children, except in cases where their parents cannot speak English.
This problem will probably work itself out provided—and it is a big proviso—the Labour Party's policy of 1961–62 is riot reintroduced, for if we have a flood of immigrants coming here again the problem will be magnified.
There are, of course, many ancillary problems. While many immigrants vastly improve their living conditions by coming here, in far too many cases their living conditions are at or near slum level from our point of view. The inflow of immigrants with their families adds to the housing problem, particularly in an area such as Manchester, where the problem is already acute. This applies to the majority of big cities. While in those areas the housing problem is at its most acute, immigrants usually decide to settle in those areas. The overcrowding to which many immigrants are accustomed causes difficulty and places them high on the local authority housing lists. This does not help to make for good relations with the indigenous population.
The maternity wards of some hospitals are crowded with immigrant women who are having babies and the waiting lists for beds for expectant mothers are filled. These problems must be faced. We must also realise that the children born in this country to immigrant parents in circumstances such as these have their own problems.
According to the latest figures I have been able to obtain, unemployment among immigrants is about three times the national average of 1½ per cent. It cannot be good for children to be brought up in such circumstances, with their parents living on unemployment pay and National Assistance. This problem hits both the children and their parents.
Despite all this, I have on many occasions observed the children of immigrant parents going to and from school and have been impressed with the way in which they are dressed and cared for. The little girls' hair is usually beautifully done and the children are neat and tidy and obviously happy. They are well behaved and provide an example for other children and parents to follow. I have been most impressed with the way in which their parents look after them. This indicates that large numbers of immigrants are anxious to do their utmost to integrate, but despite all this it is obvious that a chronic situation exists, that it may become more difficult in the future and that something must be done about it.
It is a good thing to consider just why the present situation has arisen. We must do that before we can consider a solution. It goes without saying that the problem of immigrant children stems directly from the inflow of immigrants. The net inward movement in 1955, 1956 and 1957 was between 42,000 and 45,000. In 1958, it was 30,000; in 1959, it was 20,000; in 1960, it was 57,000; and in 1961 it shot up to 135,000. Then, while we were discussing immigration legislation, it rose to 95,000 in six months, representing a rate of 190,000 a year.
That is nearly ten times what it was before. Of course, the fear of restriction uplifted the number of applications when the Bill was introduced, but it is rather extraordinary that, after the Bill had been produced, the large number of applications continued; and, in the 18 months up to December, 1963, there were 347,000 applications. That gives some indication of what would have happened if there had been no restriction on the intake of immigrants.
Furthermore, we should remember that, throughout this period, students and dependants had been admitted free of control, but in the face of the figures for 1961, it is difficult for one to understand why the party opposite should have adopted the attitude it did—[Interruption.] Well, hon. Members opposite voted against the Bill on Second Reading and Third Reading, and that is one of the reasons why we have this problem of the juveniles at school now. While the Bill was being opposed by the party opposite, another 100,000 immigrants came in, and now we have the children resulting from that intake.
One important cause of the present situation is that the position is not known to many people and I believe that few people have recognised that many of our schools have more than half their membership made up by immigrant children. That position will become worse because there seems to be a concerted move to pretend that the problem does not exist. I know that the Minister of Education has issued a document only today on this very subject, but it is a weak and watery item and the problem will not be cured simply by pretending that it does not exist.
The Minister has suggested that schools should not have more than one-third of immigrant children among their pupils and that any number over that figure should be sent to other schools so that the numbers may be kept down.
This would be no cure; it will only aggravate the problem because the children who know no English can be taught it in reasonably sized classes or groups where there are teachers to train them. On the other hand, if they are spread throughout the whole of the schools, the problem will become very much worse and, incidentally, far more expensive.
Let us remember another important point. These immigrant children will be planted in the schools which are different from those where their brothers and sisters are, and different from those where they would like to be; and in schools, probably, where they may not be welcome because they would have been forced on a particular school against everybody's inclination.
We all want to integrate these children into our economy and our national life as happily as possible and the best way for doing this is for it to be done as naturally as possible. Already, grant-aided teachers are being trained how to teach English to non-English-speaking children, and children are being taken from their classes until such time as they are sufficiently forward to change over into the full educational system. This is good strategy, and we need more of it. It is expensive, but good. I see that the circular refers to this point.
I gather that the Minister feels that I should conclude. I thought it reasonable to speak for 20 minutes.

The Joint Under-Secretary of State, Department of Education and Science (Mr. Denis Howell): Not if the hon. Gentleman wants a good answer.

Mr. Taylor: I wrote to the hon. Member and said that I should speak for 20 minutes, and I said that if this were not satisfactory we could make other arrangements. I have had no reply.
We cannot ignore the fact that the birth rate among immigrants is far higher than that among indigenous people. The figures which I have show that it is twice as high, and it may be even higher. In any case, there will be a big increase in


population. The estimate is that by the end of the century the indigenous population will have increased by 40 per cent. and the immigrant population to six times the present population.
Many immigrants want to bring their families here, and it is difficult to know who are their wives and who are their children because in many cases there is no documentation. There are difficulties in restricting the number who come to this country. We must face the fact that there will be a big increase in population.
The great increase in immigration took place in 1961, and none of the children born since that date has entered school. The difficulties which we are considering, which are great enough, do not include those children. The number will therefore increase fantastically in the next three or four years. What is the Labour Party's policy on this issue? We know that it fought immigration restriction from start to finish and that only a few weeks ago the right hon. Member for Belper (Mr. G. Brown) said that it was mad to limit immigration when we need workers. This is directly opposed to any restriction of immigration. I do not know whether that is Labour Party policy, or just his own view. Will the Under-Secretary tell us what the Labour Party will do to cure this problem, which will be very great indeed in two or three years' time?

12.12 a.m.

The Joint Under-Secretary of State, Department of Education and Science (Mr. Denis Howell): The hon. Member for Manchester, Moss Side (Mr. Frank Taylor) came very near to abuse of the decencies of the House in that he asked for an Adjournment debate on the problems of the education of immigrants and went on to make a political speech on almost every subject under the sun dealing with immigration except education. Then in one half sentence he acknowledged that this very day the Government, through the Department of Education and Science, have issued a circular giving their whole policy of education for immigrants in educational establishments, and particularly in schools. He made several political statements. It is quite proper in the House to have arguments about immigration, but not when one has asked for a debate on the specific question of education.
If the hon. Member did a disservice, I do not want to follow him too far into a general political argy-bargy at this time of night. He and his party were in power for 13 years. The problem which we have tried to tackle in the schools in six months was left to us. It is not a bit of good talking about the debate which we had on the restriction of immigration unless it is related to the arguments which were crucial at the time. Many hon. Members opposite, perhaps including the hon. Member, would have had us sign the Treaty of Rome, which would have compelled this country to accept unlimited immigration from member countries of the Treaty of Rome. It was in that context that we were discussing immigration.
He and I come from areas of high immigration. I acknowledge his concern, and I have the same concern in Birmingham. It is no accident that all these immigrants concentrated in certain areas in our big towns. They concentrated in areas where houses became vacant because of the Rent Act and the evils of that Act perpetrated by the hon. Member and his hon. Friends by reason of evictions. We do not find large areas of immigrants in council house estates or in areas containing houses taken over by local authorities. They have gone into houses from which the previous tenants were forced out as a direct result of the action of the previous Government. There is a lot to be said about that, and it is time we started to say it, but now I want to say one or two things about what I think is the constructive policy for education that is contained in the circular that has been sent out today by my right hon. Friend.
The Government's policy is that we must start from the assumption that the standards of our education must be maintained at all costs. If that intention is made clear to the parents of English children it will remove quite a few of their quite reasonable fears that if their children go to a school at which there are a lot of immigrant children they may not get the education they merit. That intention is the bedrock and foundation of the circular.
That means that if we have immigrant children who cannot speak English properly or are not up to the acamedic standards of the school, then for academic


lessons they should be separated so that they do not hold up the progress of the other scholars. The children should come together on social occasions—play, and so on—and in lessons for which a good understanding of English is not essential, but should come into the main academic stream of the school only when they have a thorough grasp of the language and have caught up academically with the rest of the school.
It also means that we must realise that there is a limit to the number of immigrant children who can be absorbed into any school. I know that, since my own children go to a school with nearly 30 per cent. of immigrant children. I am personally familiar with this problem. We think that one-third is about the limit we can expect any school or teacher to cope with. We say in the circular that when that point has been reached there should be a policy of dispersal.
I know that the hon. Gentleman does not agree with a policy of dispersal. He says that to move the children from area A to area B in Manchester stops integration. That is a very fine academic argument, but, in practice, it does not stand up, because, in practice, area A is an area that is already saturated with immigrants. Therefore, if we do not have a policy of dispersal, we automatically have a policy of segregation. In practice, therefore, we either have a policy of dispersal or one of segregation—we cannot have both, because they are quite contradictory.
I know that the hon. Gentleman does not want to support a policy of segregation, but that is the logic of what he now advocates. I therefore hope that, on reflection, he will agree with the Government's policy as outlined today. We think that when we have reached a maximum of one-third in a school it is sound sense to say that for educational and social reasons no more immigrant children should go to that school, but should be dispersed elsewhere.
The next point in our policy is to ask local authorities to appoint special welfare officers in the schools. These are non-teaching people who will help the teachers in many ways, particularly in matters of social awareness and hygiene, and so on. Many of these people from overseas have entirely different social customs and habits, and it follows from what the Gov-

ernment have said that if people settle here we are entitled to expect them to observe our conventions. We can best do that by giving this sort of aid to the teachers.
These welfare people will also form an important and direct link between the schools and the homes. It is no good getting the children right—although this is vitally important—if, after school, they go to homes where there is no contact between the English home and the immigrant population. So we believe welfare officers will play a valuable role of this social character.
I do not believe that it would be right for us to leave the debate without noting that a great deal has already been done. I hope that hon. Members will agree that a great deal has already been done in Manchester, particularly by its education authority and teachers. While we are sending out this circular today as a result of our six months in power and of our trying to grapple realistically with the problems and produce a policy that is sensible, acceptable and will work, we ought to realise that a lot of authorities over the years, years for which we are not entirely responsible, have been grappling with the problem. The local authorities deserve a lot of praise from hon. Members.
Manchester has appointed extra teachers, many part time. It has done a wonderful job in bringing in part-time teachers, particularly for the intensive teaching of English which the hon. Member recognised to be the kernel of this nut. It has been arranging for teachers to attend special courses at Manchester University and in association with the university, and has done a lot of work there. Exhibitions of books and teaching material have been mounted in Manchester. I do not think that has happened in many other parts of the country.
Manchester has encouraged the formation of study groups of teachers engaged in teaching immigrants so that there can be the greatest possible sharing of expertise between teachers. Special arrangements have been made for schools and children to be constantly supervised. Manchester has a fine record and its teachers, who have co-operated so wholeheartedly with the local authority, are, I feel, also deserving of special mention.
I will sum up my remarks by saying that we put out this policy today. We believe that it is practicable. We believe that it is acceptable. It has only been put out after prolonged discussion with the local authorities, teachers and everyone concerned with the problem. H.M. inspectors have a great deal of knowledge and information available which they put constantly for the use of local authorities and teachers and for people in the schools. I believe, given good will

all round, that this policy can be accepted.

The Question having been proposed after Ten o'clock on Tuesday evening and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at twenty-two minutes past Twelve o'clock.